Will My Revocable Living Trust Protect My Assets for My Kids if I Die First?

This is a question I get often and was specifically asked this week by a “faithful listener” of the Estate Planning TV Podcast (thank you for that!).

The question is this, essentially:

“I have a revocable living trust set up with my spouse. I want to make sure that our assets are protected from being completely exhausted from the surviving spouse after the first of us dies.

For example, I don’t want them to remarry or have something else happen and they either spend all of the assets or give them away to someone else (i.e. not the kids).

Am I currently protected in that scenario?”

The answer, is, unfortunately, no.

With a revocable living trust, when the first spouse dies the surviving spouse continues on as the sole trustee and beneficiary.

They retain the power to revoke the trust, use trust assets, and change the terms of the trust, as they please.

This means if the spouse should remarry, should lose their ability to make decision and fall under the guise of someone that is without good character, or they should just change their mind, they have the ability to completely change the distribution of trust assets after they are gone.

The solution here, thankfully, is relatively simple.

All that is required is a slightly more complex trust structure that carves out a decedent’s trust when the first spouse dies.

The surviving spouse can still maintain control over the trust and have access to the trust, if necessary (if the trust allows it), but they lose the ability to change the beneficiary designations and trust distribution language that applies after they are gone.

Now, there are some other things to think about before making this decision (income tax and capital gains tax considerations) so I’d encourage you to talk to an estate planning attorney before doing anything, but this is the likely solution to the problem.

Cheers.

Christopher Small

If you have any more questions or think you might want some help, click the link below to schedule a phone or in person strategy session. Looking forward to it! https://cmslawfirm.com/scheduleasession