Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

September 12, 2012
How should trust be updated after one spouse dies?

Q: My wife and I have a spousal trust. When one spouse dies, is it required to change the name of the trust to the surviving spouse and also the names on property and accounts held in the trust? -- Jack, CA

A: The term "spousal trust" does not have a fixed meaning in the world of estate planning, so I am not sure exactly what type of trust you have. I can think of at least four standard types that benefit the surviving spouse.

Because California is a community property state, many married couples have a joint trust for the benefit of both of them during their lifetimes.

First, you may have a straightforward joint trust that continues to be held for the benefit of the survivor after the death of one spouse, with no subtrusts created and no part of the trust becoming irrevocable. The full trust can be amended by the survivor. Unless the trust document says otherwise, the name of this type trust would stay the same, but you would need to take off the decedent's name as trustee from trust assets. You also want to be sure the trust accounts use the survivor's social security number as the tax ID number, and not the decedent's.

Second, another common planning technique for couples is to use a "disclaimer" trust. This type of trust usually starts with a joint trust. At the death of the first spouse, all of the assets continue to be held for the survivor. However, the survivor has the ability to disclaim, or say "no thanks," to any portion of the assets, which will then go into a new trust called a disclaimer trust. Disclaimer trusts are typically used for estate tax purposes, but they can still provide benefits to the surviving spouse. If the surviving spouse does not disclaim any assets, the comments I make above apply here too. If a disclaimer is made, assets will need to be retitled into the disclaimer trust, and my comments above apply to the remaining assets.

Third, at the death of the first spouse when his or her estate is not taxable, the joint trust often splits into a survivor's trust, which holds the survivor's share of the community property and all of his or her separate property, and a credit (or bypass) trust, which holds the deceased spouse's property. If the trust splits into these subtrusts, then the name of each will change from the name of the original joint trust, and the assets funded into each trust will have to be retitled. As an example, if the Smith Family Trust was created by John and Jane Smith, then upon John's death, it would split into the Smith Survivor's Trust and the Smith Credit (or Bypass) Trust, in the trusts I prepare.

Fourth, for taxable estates, there will often be an additional subtrust formed for tax planning purposes, called a marital trust. In the above example, the new subtrusts would be called the Smith Survivor's Trust, the Smith Credit Trust, and the Smith Marital Trust, in trusts that I prepare. Other names may be used in the trust for these different subtrusts, but this gives you an idea of how it works.

If you have questions about your specific trust after reading it, ask your attorney to explain how the trust works and what happens after the first spouse's death. If it has been a few years since you last reviewed your estate planning documents with your attorney, I would recommend making an appointment to go over your documents. Changes in relevant laws, changes in your relationships, and changes in your assets may make it prudent to update your documents.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.

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