What Is a Survivor’s Trust and How Does it Work?

Married couples often use joint trusts to shelter assets from probate or potential estate taxes while ensuring the surviving spouse has adequate funds to support their lifestyle. In many cases, the spouses decide that upon the death of one spouse, the trust splits into a survivor’s trust and a decedent’s trust.

If you are wondering what a survivor’s trust is and how it works, speak with an estate planning attorney at Parks Zeigler. They can answer your questions and help you decide whether a survivor’s trust is right for your family.

Survivor’s Trust Basics

A joint trust is a useful estate planning tool for many couples. Putting assets in an irrevocable trust keeps the value of the property in the trust out of the probate estate, shields it from estate taxes, and protects it from the couple’s creditors. Joint trusts can also be revocable, which keeps the assets it holds out of the probate court but does not offer protection from creditors.

When the first spouse dies, the joint trust can convert to a survivor’s trust and a decedent’s trust. Typically, an amount up to the deceased spouse’s estate tax exemption is transferred into the decedent’s trust. The rest of the trust assets would be transferred into the survivor’s trust.

The survivor’s trust is a revocable trust, which means the surviving spouse can change the terms, withdraw property, or dissolve the trust. The decedent’s trust is an irrevocable trust, and the property in it goes to the beneficiaries named in the original trust according to its terms.

Benefits of a Survivor’s Trust

A survivor’s trust gives the living spouse access to property for living expenses or any purpose they choose. The surviving spouse has control over the property in the survivor’s trust.

The decedent’s trust is available for the surviving spouse’s benefit, but at the surviving spouse’s death passes to the original beneficiaries or any contingent beneficiaries named in the original joint trust. The decedent’s trust is irrevocable and cannot be changed, which protects the original beneficiaries if the surviving spouse remarries or decides to name different beneficiaries for their property.

Setting Up a Survivor’s Trust

A couple considering putting their assets in a joint trust must decide the primary purpose of the trust. When avoiding probate is the primary goal, many couples select a joint living trust. The couple would be joint trustees of the property and may manage it however they choose. Couples seeking creditor protection or tax efficiency might select an irrevocable joint trust.

Regardless of whether the original joint trust is revocable or irrevocable, the couple would name beneficiaries and contingent beneficiaries for the trust property. They would include a provision stating that upon the first death, the trust divides into two sub-trusts. One sub-trust would be an irrevocable decedent’s trust naming the same beneficiaries. The other sub-trust would be the revocable survivor’s trust.

There are multiple factors to consider when deciding how to structure a joint trust and survivor’s trust. A skilled estate planning attorney will walk you through all the implications and help you make the best decisions for your family.

We Are Here To Help

Planning for the future can feel overwhelming, but you don’t have to do it alone. Whether you’re just getting started or have questions about wills, trusts, or other estate planning options, we’re here to help. Reach out today to speak with an experienced estate planning attorney. You can give us a call or simply fill out a short form to schedule your consultation—we’ll guide you every step of the way.

Survivor’s trusts can be a valuable component of an estate plan. However, it is important to understand what a survivor’s trust is and how it works before deciding whether it is right in your situation.