MARITAL TRUST
Back to GlossaryDefinition
A type of trust used by married couples to reduce estate taxes. It will be formed upon the death of one of the spouses, often in conjunction with a credit shelter trust. Since there is no estate tax related to death transfers made to a surviving spouse, assets that are not being left to children or grandchildren to fully utilize estate tax exemptions will be transferred to this trust for the benefit of the surviving spouse.
Summary
A Marital Trust is an estate planning tool that helps married couples minimize taxes when one spouse dies. When the first spouse passes away, this trust is created to hold assets for the surviving spouse's benefit. The key advantage is that transfers between spouses are tax-free, so assets can be moved into this trust without triggering estate taxes immediately. It's often used alongside a Credit Shelter Trust to maximize tax savings while ensuring the surviving spouse has access to needed funds for living expenses.
Usage Context
Essential when studying estate planning strategies, tax-advantaged wealth transfer methods, and trust structures for high-net-worth individuals and families.
Common Confusions
- Thinking the marital trust eliminates estate taxes entirely rather than just deferring them
- Confusing marital trusts with credit shelter trusts - they serve different purposes
- Assuming the surviving spouse owns the trust assets outright
- Not understanding that estate taxes may still apply when the surviving spouse dies
- Believing this trust is created during both spouses' lifetimes rather than upon the first death
