According to the Census Bureau, 56% of surviving spouses over age 65 are women. When it comes to estate planning for the surviving spouse, you can use your trust to give them extra protection.
Some couples prefer the simplicity of having everything go to the surviving spouse outright. If that is your preference, and you have an older trust, it is worth having it reviewed. The default option not that long ago was to set everyone up with an “A-B” trust, splitting the trust in two at the death of the first spouse. The estate tax reason for doing that has disappeared, leaving you free to update the trust to simplify things for your surviving spouse. But before you pick up the phone to make that change, read on.
Surviving Spouse’s Protection Trust
The trouble with the simple direct option is that if your surviving spouse can do anything she wants with the money, so can all her creditors and predators. So instead, we put the deceased spouse's part of the estate into a separate irrevocable trust.
With a separate trust, you can include a co-trustee. The co-trustee is there as a safeguard against creditors trying to reach the money. But what happens when mom is ready to buy a new car, and the co-trustee says, “no”? Mom gets to say two important words to the co-trustee, “You’re fired” and go find a new co-trustee.
The co-trustee gets to act as the “bad guy” and say no to all the creditors and predators that are trying to reach mom’s money.
Protecting the Kids Too
If mom finds a new special guy, the Protection Trust can be set up to protect that portion of the estate for the couple’s children. For example, the trust can expand the definition of “remarriage” to include spending the night with someone. Following that the trust can be set up to protect the principle for the duration of the relationship, or end that portion of the trust, and distribute the balance to the children.
Families have different goals and priorities, and as the options above illustrate, not everyone will want the same thing for their family situation. It’s important to know what kind of plan you have, and have a conversation with your attorney about what your goals for the future look like.