Trusts are a common component of a comprehensive Estate Plan. However, one concern people have when creating Trusts is whether the Trust will be used for the purpose they intend it to be used. In particular, married individuals sometimes worry if, after one of them dies, the other will be able to control the Trust, even if a new use is not consistent with the purpose for which it was created.
This valid concern does not necessarily indicate that the spouses distrust one another. Life can throw curveballs at you, and it is not unusual that new circumstances might prompt a surviving spouse to want to change how a Trust is used.
For example, suppose a relatively young and wealthy couple creates a Trust for the benefit of their children, and one of them passes. If the surviving spouse remarries and has additional children or step-children, it is natural for the surviving spouse to want the step-children or half-siblings to share in the benefits of the Trust. Will the spouse be able to alter the Trust to serve that purpose?
Or, suppose, after one spouse dies, one of the children becomes a drug addict or otherwise shows that they are irresponsible. Can the surviving spouse manage the Trust without running afoul of fiduciary responsibilities toward the existing beneficiaries? Suppose a Trust is created for the benefit of a charity. If the charity starts engaging in activities that work against what the spouses supported when they established the Trust, can the surviving spouse change it?
There are many scenarios that might make both spouses worry about what could happen, whether they are the one that passes first or the one that survives.
How Do You Make a Trust Work Over the Long Run?
Some of the scenarios outlined above can make you start worrying about whether you should create a Trust at all. But one of the great things about Trusts is that they can take into account numerous considerations and contingencies.
It is helpful to understand how Trusts work. A Trust is created by a Grantor who establishes the terms of the Trust. While the Grantor is alive, the Trust is revocable during that Grantor’s life. This means that it can be altered or even completely dissolved during the Grantor’s life. However, when the Grantor dies, the Trust becomes irrevocable. The terms of the Trust cannot be changed, and assets cannot be added to it. The Trust’s assets must be managed and distributed according to the terms of the Trust for the benefit of the Trust’s designated beneficiaries.
But what if there is more than one Grantor? Often, married couples create Joint Trusts, and both are Grantors. As a general rule, unless the Trust explicitly says that the Trust becomes irrevocable on the death of one spouse, it becomes irrevocable only after both spouses pass. So the answer to the question is: unless otherwise specified, yes, your spouse will have control of the Trust when you pass away. But what if that is different from what either of you really wants?
Joint Grantors may want to ensure that the Trust they create will be robust enough to serve the purposes they both want, yet provide sufficient flexibility for a successor Trustee to manage it should circumstances change significantly.
There are several ways to do this. Grantors can designate additional Trustees or provide for a successor Trustee to take the place of a deceased spouse so that the surviving spouse does not have unilateral authority to change the terms of the Trust. This type of provision is important for other reasons, as well. For example, a surviving spouse may later become incapacitated by developing dementia or Alzheimer’s or might be susceptible to undue pressure from one or more beneficiaries who would benefit from a change in the Trust. Having multiple Trustees can help protect the interests of the deceased Grantor, the surviving Trustee, and the original beneficiaries.
But other things can be done, as well. The bottom line is that the way to address these concerns is through careful and thoughtful drafting of the Trust instrument. While not every contingency can be imagined, there are several ways that Trusts can be configured, specifying the circumstances under which the Trust can be altered, amended, or even dissolved. Grantors can even put in a “no contest” clause, which provides that any beneficiaries who decide to challenge the terms of the Trust will automatically be written out of the document, losing whatever benefits they might have had.
Rely on Experienced Estate Attorneys to Draft Your Trust
Whether your spouse will control the Trust after you pass away is a legitimate concern, and the answer will depend upon how you have drafted your Trust. An experienced estate attorney will ask you and your spouse many questions about what you want your Trust to achieve and explain how your Trust will operate under different circumstances. At eLegacy, we often encourage our clients to use Trusts to achieve their Estate Planning goals, and it is important to us to get your Trust right the first time.
To find out more about Estate Plans and Trusts and to have your questions answered, contact the estate attorneys at eLegacy today.