Estate Planning Trust Options for Married Couples
Selecting the right estate planning trust is an important decision for married couples. The trust structure you choose can have significant implications for taxes, control of assets, creditor protection, and more. In this post, I’ll overview some of the most common estate planning trust options specifically designed for married couples.
There are several estate planning trust structures commonly used by married couples:
1. Probate Avoidance Trust – A simple trust structure focused solely on avoiding probate. Offers little tax planning or creditor protection.
2. Disclaimer Trust – Provides flexibility through use of a disclaimer to enable some tax planning after the first spouse’s death.
3. Modified A/B Trust – Establishes creditor protection and separates assets into two trusts after the first death, an irrevocable exemption trust and a survivor’s trust.
4. Intentionally Defective Irrevocable Trust (IDIT) – A specialized irrevocable trust that provides step-up in basis planning.
5. State Exemption Trust with Marital Deduction Trust – Uses the state estate tax exemption while also funding a marital deduction trust.
6. QTIP Trust with Clayton Election – Enables post-mortem planning while maximizing use of the marital deduction.
7. QTIP Trust – Protects assets for beneficiaries selected by the first spouse to die while allowing access by the survivor.
8. QTIP Trust with QDOT – A specialized QTIP trust used when one spouse is a non-US citizen.
Key Decision Factors
When selecting from one of these trust structures, some of the key factors married couples should consider include:
– Estate tax planning needs and asset levels
– Whether maximum flexibility or control is more important
– The need for creditor or divorce protection
– Costs and administrative complexity
– Whether special planning is needed for non-US citizen spouse
The choice depends on each couple’s unique situation and priorities. Consulting an experienced estate planning attorney is crucial to selecting the right option. While no “one-size-fits-all” solution exists, one or more of the trust structures above may apply.
By Attorney Michael K. Hepworth, 2023