3 Reasons why you and your spouse should have separate trusts

Dec 26

Most of my younger clients tend to stick with the joint trust because it’s simpler and cheaper to set up.

However, as time goes on you may want to have your own separate trust for one of three reasons:

1. You’re concerned about remarriage risk. This is most common in blended families where each spouse has children from a prior relationship. They want to make sure their spouse is taken care of, but they also want to make sure their kids will inherit their share upon the surviving spouse’s death.

2. You’re concerned about creditor protection - if you structure your trusts properly, then having separate trusts may protect from potential creditors of your spouse. This is a general concern for anyone who owns rental properties or if you or your spouse are in a profession with a higher risk of lawsuits - for example, doctors, CPA’s or attorneys.

3. You’re concerned about estate taxes. Most clients do not have to worry about federal estate taxes, but if the state you live in has its own estate tax, you minimize estate taxes by creating separate trusts. For example, in Massachusetts, you each have a 2 million exemption, but with separate trusts, you can effectively double your exemption to 4 million.

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