Disclaimer: This post is for informational purposes only and is not legal or tax advice. We encourage you to work with a competent CPA or tax advisor of your choosing. Our office is more than happy to collaborate with them on your case.
When most married couples think about setting up a trust, they assume they only need one. After all, they’re a team. However, when it comes to estate planning in North Carolina, having two separate trusts—one for each spouse—can be the smarter move. It’s not about being secretive or unromantic. It’s about protecting your wishes, assets, and family from future problems you can’t predict.
Joint trusts can make sense in some situations. But if you’ve been married before, have children from a previous relationship, or want more control over how your assets are handled after you’re gone, two trusts give you more options and stronger protections.
Keeping Control of Your Legacy
One of the biggest reasons to set up separate trusts is to protect your intent after you die. If your assets go into a joint trust, your surviving spouse could change the terms later, especially if they remarry or end up in a new relationship. That may not be what you want. If you want your assets to go to your children or a charity, you need to lock that in.
When each spouse has their own trust, they can set the rules for how their assets are handled after death. This ensures their plans are carried out, even if the surviving spouse’s situation changes. It also helps protect against things like undue influence, fraud, or pressure from others.
Estate Tax Planning and Preserving Exemptions
Every person gets an estate tax exemption. As of this publication, that amount is $13.99 million per person, but that number could be cut in half if current tax cuts aren’t extended. That’s why it’s important to plan ahead. Two separate trusts make it easier to track what assets belong to each spouse and how they’re counted against those exemption limits.
You can also take advantage of tools like portability and disclaimers. Portability lets a surviving spouse use the exemption amount of the spouse who passed away, but only if a proper tax filing is made. A disclaimer is when the surviving spouse decides not to accept some assets and lets them pass into the first spouse’s trust instead. This needs to be filed with both the IRS and the local clerk of court within nine months, so it’s time-sensitive.
Even if your estate is below the current limits, laws change. In 1991, the exemption was just $600,000. So, it’s smart to set things up in a way that gives you options down the road.
Separate trusts also make sense if each spouse has children from earlier relationships. This setup helps ensure that each parent’s assets go to their children without depending on what the surviving spouse chooses to do later. It’s a solid way to avoid family disputes or legal headaches after you’re gone.
If you’re thinking about the best way to protect your legacy, your kids, and your spouse, it may be time to consider setting up two trusts instead of one. B. Joseph Causey, Jr., Attorney at Law, can help you put a plan in place that works for your situation and gives you peace of mind. Reach out today to get started.