Getting married means making a wide variety of important decisions. And for some Michigan couples, it means protecting their future interests. While most married couples will go through the process of developing an estate plan together, this usually entails drafting a will and ensuring that their named beneficiaries match each other when it comes to specific assets and property. But what about taking steps to protect the other spouse in the event of one's own death? No matter what age one is or how long a marriage has lasted, it is important to take estate planning measures to protect the interests of both spouses in the event of incapacity or death.
It should be noted that federal law allows for unlimited marital deductions. This refers to the amount of property that can pass onto a spouse without any estate tax being assessed on it. Because a gift tax could be imposed on assets and property passed to a spouse while living, many couples use the unique estate planning tool known as a marital trust.
This type of trust is designed to allow spouses and even their children to receive their inheritance. Any property placed in a marital trust qualifies for the marital deduction in the gross estate of the deceased spouse. This means that although the amount in included in his or her estate, it is not subject to estate taxes. Married couples are able to pass an unlimited amount of money and assets to one another during their life or at death without any implications of an estate tax or a gift tax.
Another goal of this trust is to protect these assets. If a spouse remarries, a marital trust will protect the contained assets from the claims of a subsequent spouse. Thus, a marital trust is able to control what happens to its contents in future unplanned circumstances.
Depending on the needs and intentions of the spouses, they can design their marital trust to serve their best interests. Because of that, it is important to understand the different types of marital trusts and how they could best meet their goals. Spouses seeking to include a marital trust in their estate plan should ensure they are aware of its benefits and how they work.
Source: Investopedia.com, "Estate Planning: Marital And Non-Marital Trusts," Cathy Pareto, accessed on July 9, 2017