Married couples looking to secure their financial future and provide for the surviving spouse tax-wise may consider a marital trust.
What Is a Marital Trust?
A marital trust is a legal arrangement in estate planning that helps married couples protect assets for a surviving spouse. It often plays an important part in transferring property after one partner passes away. The trust holds assets and manages tax issues.
Many couples use it to set clear instructions on how income and property should move. This treatment can give the trust a special tax status that is not available under common law property rules.
How Does a Marital Trust Work in an Estate Plan?
The trust becomes active when one spouse dies. It passes property to the surviving spouse in a way that often avoids immediate estate taxes. The unlimited marital deduction plays a major role here. This benefit can lower tax bills during a difficult time. The process remains simple and direct.
In estate planning in Florida, marital trusts let both spouses hold property together and bring clear tax benefits. If a marriage ends, any revocable trust provision affecting a spouse is void, as if that spouse had passed away.
What Is the Unlimited Marital Deduction?
The unlimited marital deduction is a main part of marital trusts. It lets a spouse receive any amount of assets without paying federal estate taxes at the time of the first death. This tax relief offers peace of mind. The rule plays a big part in keeping family finances stable.
Under IRC § 1014(b)(6), each half of community property in a trust gets a step-up in basis on the death of a spouse, which may reduce future tax burdens.
What Types of Marital Trusts Exist?
Marital trusts come in different forms with distinct features. A well-known type is the Qualified Terminable Interest Property (QTIP) trust, which lets the first spouse set instructions on asset distribution after the surviving spouse passes.
One type used in Florida is the Community Property Trust, which must be signed by both spouses, include required cautionary language at the beginning, and declare itself as a community property trust.
How can a Marital Trust Benefit a Surviving Spouse?
A marital trust offers many benefits. It ensures that a surviving spouse can access trust assets and income during hard times. The trust document can specify how assets are managed and shared with family members. This arrangement protects the family's financial legacy and keeps tax issues in check.
For example, a community property trust provides a full step-up in basis to both halves of the trust property at the death of the first spouse. Transferring Florida homestead property into such a trust does not cause a tax reassessment, which helps preserve the homestead exemption.
What Is the Role of Estate Tax in Marital Trusts?
Estate taxes affect how marital trusts work. By using a marital trust, families delay paying federal estate taxes until after the surviving spouse dies. This delay can lower tax bills, especially when estates are large. The benefit stems from the unlimited marital deduction.
Florida Statutes § 736.1511 states that a community property trust is seen as a trust formed under state community property law for tax purposes, giving both spouses full step-up benefits rather than just one half, as seen in common law settings.
What are the Cons of a Marital Trust?
Marital trusts have some downsides too. One drawback is that they usually remain fixed once set up, making changes very hard. Also, the surviving spouse's estate might face higher taxes later on, depending on the trust's design and asset value.
Mingling nonmarital funds with marital trust assets can lead to such funds being subject to fair division in a divorce. In addition, if a trust is formed with marital funds or if marital effort increases its value, it may be seen as a marital asset subject to equitable distribution.
Asset Protection and Trustee Authority
Hiding assets in a trust during a divorce can be seen as fraudulent under Florida law. Courts require full financial disclosure, and if assets are moved into a trust to hide them, the court may void the transfer and impose penalties.
Trusts set up with funds owned before the marriage, by way of inheritance or gift, are typically protected in a divorce. If money from a nonmarital trust is used to buy property, that property normally stays nonmarital and is not subject to division.
How Do You Establish a Marital Trust?
Setting up a marital trust calls for careful planning and legal guidance. You draft a trust document that spells out the terms, beneficiaries, and conditions. A trust lawyer in Broward County, Florida will check that this document fits your overall estate plan and tax needs.
For a Florida Community Property Trust, the document must be signed by both spouses and include cautionary language that clearly states it is a community property trust.
The Different Types of Spousal Trusts
Other spousal trusts exist for various situations. Spousal Lifetime Access Trusts (SLATs) and bypass trusts serve different estate planning purposes. Each option carries its own features and suits specific financial goals. People choose the trust that best fits their unique circumstances.
Community Property Trusts, governed by Florida Statutes §§ 736.1501–736.1512, allow spouses to treat assets as community property and may give eligibility for a double step-up in basis at death.
Trustee Powers and Modern Trust Law Changes
Recent updates in Florida law give trustees more authority to move assets into trusts that meet supplemental needs. Trustees may change terms or adjust the asset mix as allowed under the new provisions in Florida Statute §736.04117, which took effect on June 20, 2025.
Under these new rules, trustees who shift assets into a new trust are not seen as the trust's creator. This clear separation means that the original trust remains distinct from any new trust formed under the trustee's decision.
What Is the Future of Estate Tax and Marital Trusts?
Legal rules regarding estate taxes and marital trusts can change over time. New laws might affect how these trusts work. It makes sense to review your estate plan every so often. Staying informed will help ensure your wishes are met and that your plan follows current laws.
Florida enacted Senate Bill 262, which gives authorized trustees the power to shift assets into supplemental needs trusts, a change that applies to all Florida-governed trusts as of June 20, 2025.
Marital trusts remain a versatile and effective tool in estate planning. They offer financial safety and help manage tax matters for a surviving spouse. They can be adjusted to meet individual estate goals. This article draws on verified legal texts and state guidelines.
To sum up, the trust protects a spouse and preserves family assets. Disclosure: The information in this article comes from verified state laws, federal guidelines, and legal texts.
