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Spousal lifetime trusts

On Behalf of | Jan 5, 2022 | Estate Planning |

With gift and estate exemption limits decreasing in the next few years, California residents may be looking for solutions. Spouses can, temporarily, transfer wealth to each other through gift deductions of no more than $11.7 million for each spouse. When used correctly, only gifts above the legal threshold get taxed and publicly listed. Estate planning while expecting that tax gifts will be lowered can lead you to setting up a spousal lifetime trust.

As one transfers assets to the other

Your fiduciary can determine how your trust should be used, but the idea is for one spouse to transfer financial assets to the other via the trust. A trust is unique because the assets held therein technically belong to the trust. Since trusts don’t have Social Security numbers or acquire debt, they keep your wealth from larger taxation. For each plan, a single person makes deposits into a trust that their spouse is named the beneficiary of.

The irrevocable status

Revocable and irrevocable trusts are both legal. A revocable trust is flexible and gives you leeway as its owner. Spousal lifetime asset trusts differ in that their stipulations are stricter. The pros and cons of this strictness are dependent on your needs. You’ll lose assets to your spouse, for example, but at the same time, it’s a type of gift. In addition, you can’t withdraw from this trust, but that hedges your spouse’s money for later use. Irrevocable trusts are:

  • Legal and can issue funds for up to 20 years
  • Managed by the oversight of an entity you choose
  • Private assets that aren’t probated after you die
  • Ideal when you can afford to ignore the fund indefinitely

Estate planning in California

There are legal ways to reduce taxes and protect your estate from creditors. With some options now becoming obsolete, a spousal lifetime trust is often considered as an option. You may want to learn more about trusts for your spouse and heirs alike.