Tag Archives: living trust

Second marriages: providing for a surviving spouse in a trust

By Sally Wagley, Maine elder law and estate attorney

We have had a number of clients who fit the following profile: They are married for a second time, each with children from a previous marriage. One of them has substantially more than the other. Let’s assume for discussion purposes that the husband is the one with more than the wife. The husband wants to ensure that, should he die first, the wife has enough income to live comfortably for the rest of her life. However, he does not want to leave assets to her outright, as he wants to make sure that his children will ultimately inherit.

One option is for the husband to leave some or all of his estate to a trust for his wife’s benefit. Such a trust typically provides that she gets all the income generated by the assets placed in trust, to give her a stream of income which is adequate to maintain her standard of living. The trust may provide, in addition, that should the trust income and her own income be inadequate, the wife can receive amounts of principal which are needed for this purpose.

Who should be the trustee of this trust? One option is for the husband to name one or more of his children as trustees. If his estate is substantial, it is possible to have a bank serve as trustee. Or, if the husband trusts the wife to be a responsible trustee and to abide by the rules of the trust, he can name her to be the trustee, with one or more of his children to become the successor trustee if she becomes incapacitated.

This arrangement may be coupled with giving the wife a life estate in any real estate which he owns separately, such as a primary home or a cottage.

Using a Revocable Living Trust to Avoid Probate

“Probate” – a word that creates fear and dread in the hearts of many. (For more information on what “probate” is, see my previous blog, “What is Probate?”)  But the truth is:  While the probate process in some other states is complex, time consuming and expensive, Maine has a streamlined probate process which for most people is relatively fast and is no more expensive than alternatives to probate.

 Reasons to avoid probate.  Nevertheless, in some instances, it can make sense to make arrangements to avoid probate.  This is true if: 

  • You have real estate outside of Maine; or
  • You have concerns about privacy and want to keep the details of your estate plan private.

 Ways to avoid probate. A number of simple ways can be used to avoid probate, such as: 

  • Putting real estate, bank accounts and investment accounts in joint names;
  • Designating beneficiaries on investment accounts, retirement plans, annuities and life insurance; 
  • Using “transfer on death” designations (“TOD” or “POD”) on accounts.

 Using a Revocable Living Trust to avoid probate. A “revocable living trust” may also be part of a plan to avoid probate.   This is done as follows:   A lawyer writes up a trust document.   Under this document, you name yourself as trustee. This means that during your life, and for as long as you are mentally competent, you remain in control of your assets.  You are able to add assets to or remove assets from the trust, spend money from it, change the terms of the trust, or revoke the trust altogether. You also name a “successor trustee”:  a trusted person (such as a family member or bank) to take charge of the assets when you die, or possibly sooner, if you become mentally incompetent.  When you die, the successor trustee pays bills and then distributes money and property according to the directions in the trust document, to the people you name in the document and in the amounts directed by you.  This can all be done without anyone having to file papers in the probate court. This preserves your privacy.  And if you have real estate outside of Maine, it avoids the necessity of filing for probate in another state, which can indeed be expensive.

 When considering whether to have a trust of this type prepared, be aware that the fees will be higher than if you go with a simple will.  This is because, in addition to the drafting of the trust document, deeds must be prepared, transferring your home and other real estate to the trust. Your bank and investment accounts will also need to be transferred to the trust, and beneficiaries will need to be changed on your retirement plans and life insurance.    This will all require more time on the part of your attorney, for which you should expect to be billed. 

(This blog is by attorney Sally M. Wagley, a Maine elder law attorney with the firm of Levey & Wagley, P.A., in Winthrop, Maine.  The information provided on this website is for informational and educational purposes only.   This information should not be construed as rendering legal advice or offering an answer to a specific legal problem.)

Trusts 101

Clients frequently come into my law office asking “Should I (or we) have a trust?”  My answer is always “It depends on your situation and what your goals are.” 

Then I ask clients, “What are your goals?   What are the concerns you have that make you think about having a trust?”   These concerns may include:

  • Providing for a minor or young adult child
  • Providing for a disabled person
  • Providing for a pet
  • Avoiding probate
  • Minimizing estate tax
  • Preserving your assets against the high cost of nursing home care
  • Keeping your vacation home in the family.

There are many different types of trusts, for many different purposes:

  • A trust for a minor or young adult child;
  • A “special needs trust” for a disabled person;
  • A trust for the care of an animal;
  • A revocable living trust, to avoid probate;
  • A tax-oriented trust, to reduce estate taxes;
  • A trust to preserving your assets against the high cost of nursing home care;
  • A trust to hold your vacation home for the benefit of your family.

In the coming weeks, I will write about different types of trusts which can be useful depending on the client’s situation. Later this week:  Trusts for minor or young adult children.