While getting married is an exciting time, it can also prove stressful as couples combine their finances and define individual responsibilities related to them. This process can become particularly complicated if trusts are involved as part of an estate plan. Marriage means that many assets become joint property, but does this override what has already been laid out in a trust? Individuals should answer this question completely before tying the knot to ensure that they maintain their financial situation as intended. In some situations, a marriage will override a trust if the owner dies while still married. However, this is not always the case, so it is important to figure out exactly what will happen in that situation. Frequently, this changes based on state law, so it is also important to understand what the legal statutes are in various jurisdictions.
When Marriage Overrides the Stipulations of a Trust
If you create a trust prior to marriage and then die, many states will assume that you would want your spouse to inherit your property. In these circumstances, the court actually has legal permission to rewrite portions of a trust to name your spouse as a beneficiary. However, you can stipulate in the trust that you do not wish for it to change after you get married, which will prevent the courts from making any alterations. Should you have a living trust, you can always amend it when you get married to state whether or not you wish for the terms to change as a result of the marriage. Stating this outright is the best way to ensure that your exact wishes are followed. Of course, you should also talk to your spouse about your wishes so that no surprises occur after your death.
Ultimately, spouses can contest a trust even though it is a legally binding document. While it is rare for spouses to win these contests, it does happen. Even if your spouse does not win, the contest can create a financial hardship for the trustee and beneficiaries and slow down the distribution process. The most secure way of amending a trust is to do so with an attorney who is familiar with state laws. That way, you can rest assured that the language and terms comply with the state laws where you live. When getting married, it almost always makes sense to have an attorney read over the trust and ensure that it aligns with your wishes, especially with a living trust, which covers much more than just assets.
Trusts Created After Marriage
People may naturally assume that a trust created after marriage does not get overridden by that marriage, but this is not always the case. This is because state laws determine spousal inheritance rights, and they can supersede the stipulations of a trust. The real issue arises with common law rights versus community property laws. States with common law regulations determine spousal inheritance rights for all property that is obtained after a marriage, and in these states assets belong to the person named on the title or whose income was used for the purchase. Marriage does not override a trust in these states because only the asset owner can place it in a trust. In the event that the asset is titled in both names, the other spouse must give explicit permission for the transfer.
In community property states, the law negates a trust created after marriage in cases where a spouse is not named as a beneficiary and the asset was also acquired after marriage. This is the case regardless of whose money was used to make the purchase or whose name appears on the title. Only nine states have community property laws, so it is very important to know if you live in one of these jurisdictions or if you plan to relocate to one. Community property laws make the assumption that a spouse always has the right to assets considered marital property. However, assets considered separate property remain protected.
Preserving the Intentions of a Trust in the Event of Remarriage
Whether you choose to remarry or an ex does, there are important steps to take to safeguard the intentions behind a trust. In either case, you should meet with a lawyer to review the goals of your trust and ensure that there are no unintended consequences. Keep in mind that in some cases a trust can be overridden to provide for a new spouse if you die. You may want to remove your ex as a beneficiary altogether and add your new spouse, but these decisions should be made in conjunction with an estate lawyer who is familiar with the intricacies of these laws. Another option is to create a new trust to provide for your new spouse and any other beneficiaries, such as children. One option is a qualified terminable interest property trust, or QTIP, which allows you to name your second spouse as a life beneficiary and then other beneficiaries, such as children from a previous marriage, as final beneficiaries. This trust structure comes with an estate tax when the second spouse dies.