It is common for married couples to create a single revocable trust together while both are alive. Generally, no action must be taken upon the death of one spouse, but not all trusts are designed the same way. Even if the person in charge of the trust, called the “trustee,” is required to take some action upon the spouse’s death, those actions are usually fairly minimal, compared to the actions required when the second spouse dies. If any doubt exists as to whether the trustee must act, the trustee should contact an online legal website.
How Marital Trusts Usually Work
When the first spouse dies -- often called the “decedent spouse,” -- the trust usually divides into two trusts. The division automatically takes place upon the death of the decedent spouse. One trust, usually called the “decedent’s trust,” holds the decedent spouse’s property, while the other trust, usually called the “survivor’s trust,” holds the property that the living spouse owns. Trusts usually include language that allows the surviving spouse to use as much of the property in the decedent’s trust as the surviving spouse needs. Upon the death of the surviving spouse, the property held in both the decedent’s trust and the survivor’s trust is distributed to the beneficiaries named in the trust document.
Reviewing the Trust Document
A trust document is essentially a list of instructions that the person in charge of the trust, called the “trustee,” must follow. A marital trust usually names both spouses as co-trustees. Upon the death of one spouse, the surviving spouse is usually the sole trustee. The trustee should carefully review the trust document upon the death of the decedent spouse to determine whether the trustee is required to take any action. Some trust documents provide that the trustee is to distribute some item from the decedent’s trust upon the death of the first spouse to die. For example, the trust might read, “If John Smith is the first spouse to die, the trustee shall distribute from the Decedent’s Trust John Smith’s stamp collection to John Smith’s friend, Robert Johnson.” The trustee must follow such an instruction.
Upon the death of one spouse, the trust document most likely directs the trustee to file any income tax forms on behalf of the deceased spouse. Income tax filings, both federal and state (if the state imposes income tax), are required if the decedent spouse earned taxable income during the tax year in which the decedent spouse died. If income tax is owed but not paid, the tax agency can enforce the tax obligation against the trust property. If the trust property has already been distributed to the beneficiaries when the taxing authority learns of the unpaid taxes, such as after the death of the surviving spouse, the taxing agency can look to the trustee and/or the beneficiaries for reimbursement of the tax due.
Revocation and Amendment
As its name suggests, revocable trusts can be canceled or amended. This may be limited by the trust document upon the death of the decedent spouse. Some trust documents provide that the surviving spouse can revoke and/or amend both the decedent’s trust and the survivor’s trust. A common variation is a trust document that provides that, upon the death of the first spouse, the trustee, usually the surviving spouse, may only revoke or cancel the surviving spouse’s trust. Such a restriction is common with blended families, where at least one spouse has children from a previous marriage and the couple has children together. The risk is that, upon the death of the first spouse, the surviving spouse will amend the decedent’s trust, remove the deceased spouse’s children from the prior relationship as beneficiaries, and substitute those children for the children the couple had tougher. In other words, this type of restriction would prevent the surviving spouse from disinheriting the children of the deceased spouse. The trustee must read those portions of the trust document that discuss revocation and amendment carefully before making any changes.
- The Executor’s Guide: Settling a Loved One’s Estate or Trust (4th Edition); Mary Randolph
- Drafting California Revocable Trusts; Continuing Education of the Bar