Scott N. Carter, trust attorney, explains how irrevocable trusts get set up to protect a deceased person’s estate; why trusts cannot be changed by a surviving spouse; and explains the duties of a trustee.
What is the purpose of an Irrevocable Trust?
I now draft different kinds of trusts. What we have in this valley a lot of times is what we call a blended family. We have the spouse dies but they each have kids from prior marriages. So what we have now is the decedent’s estate they want to protect so we put it into a trust that is irrevocable. What we mean by that is that the surviving spouse cannot change it.
We don’t want the situation where I have a couple come in and they say to me, okay here is what we want to do with the kids but you know what, I love her kids, she loves my kids. One of them dies and they come in and they say, well I really don’t love their kids. Definitely, the decedent loved their kids. So that trust now becomes irrevocable. The survivor’s side is revocable so they can change it. But the decedent’s side they cannot change. That’s important in a blended family.
Duties of a Trustee
Now we come up with the duties of a trustee. That surviving spouse, depending on how we have written that trust has certain duties. They have to run the trust the way we drafted it which means typically that they are going to get from that trust all the income. They are not going to be able to change it and give it away to their kids.
They have a duty to take income. We will usually put in language that allows them to take out principal, if they need it, for their health, education, maintenance or support. We do want to take care of our spouse. That is a standard request by married couples – you’re married so I’d hope you love your spouse and you would want to take care of them whether you are alive or deceased.
We can draft the trust so that we can protect that surviving spouse and make sure they can maintain their standard of living and make sure that if they need help they can get it. But at the same time, our goal is to protect the children of the decedent to make sure they are not, shall we say, disinherited or manipulated by a surviving spouse that they don’t get their share from their parent.
It works to the benefit of everyone that we protect both sides. In this valley, we have a very high rate of divorce and we have a very high rate of blended families so that is a very important facet of the estate planning.
What Happens Without Irrevocable Trusts?
If you don’t do the trust and just say okay I leave it all to my spouse, now what are you doing? You have now left it so the spouse has absolute control. At some point that spouse may remarry and want to give it away to a new spouse or figure out – your kids are not my kids, I don’t have that relationship with them and even though we talked about giving it all to the kids, I don’t want to.
They go to a lawyer and the lawyer says, well he left it, or she left it all to you, you can do whatever you want. I get some very sad families when they come in and the kids are crying saying this is ridiculous – how could my Dad or my Mom not take care of us like this. It happens all the time.
Irrevocable Trust Advantages
The fact that we do a trust where it splits and part of it becomes irrevocable is not a penalty to the spouse. It is protection each way because you do not know which spouse is going to die first so you want to make sure each of them protects their family.
Scott N. Carter is a partner in a boutique San Jose law firm, Carter, Dougherty & McGuire. The firm’s business principles are driven by the needs of their clients. They are certified specialists in taxation, probate, estate planning, and trust law. Scott can be reached at 408-241-2121 or http://www.cdbatlaw.com.
