Wife & I have considerable financial assets & real property. Most was acquired during marriage, but each brought substantial assets to the marriage. We are considering a marital trust for benefit of our 2 sons, including living will, appointment of guardian, ILIT, etc. Will putting our pre-marital assets in the marital trust be problematic if we are to divorce later? Trying to avoid creating multiple trusts, yet want to leave all assets to our sons, after 2nd spouse passes. Doesn't appear to be any case law on the matter of pre-marital assets v. marital trust in divorce cases. Only cases are in other states: irrevocable trusts split 50/50; revocable stays with whomever brought the assets to marriage (incl passive growth). What about MD?
2 Answers from Attorneys
If a trust owns property, the trust instrument should say what happens in various contingencies. Once property becomes "co-mingled" it is harder to separate out as non-marital property. Keep in mind that determining what is "marital property" does not guarantee how that property would be allocated or what monetary award might be given if a marriage were to dissolve. However, there are generally other ways to satisfy the concerns you raise and competent counsel can assist.
Generally, a "living will" has nothing to do with property or a marital trust but instead describes what personal medical decisions the planner has made. It should not be included in a trust.
These questions sound very fact-specific and it may be beneficial to have personalized planning. "Marital Trusts" come in many different flavors. Oftentimes the term is used to describe a trust designed to maximize the federal exemption amount though recent changes to tax law may make it less significant of a planning tool for that purpose.
You also describe wanting real property to eventually pass to children. In some cases planners should consider using enhanced life estate deeds - they are a very cost-effective means of avoiding probate and passing property to children after both spouses die without the necessity of a trust for that real estate.
You're encouraged to seek legal counsel to review your particular situation. You are welcome to call my firm or another of your choosing. Keep in mind that this post neither offers personalized advice nor creates any attorney/client relationship.
Suggest you talk to an attorney who handles Federal/MD estate planning and Federal/MD taxation matters. Information will need to be assembled and carefully reviewed for a proper analysis and estate distribution plan to be implemented. An experienced estate/tax attorney in MD should be able to handle this type of matter and to protect the interests of the client. Please note that, in accordance with the MD Code of Professional Responsibility for Attorneys, a signed engagement letter is necessary in order to engage my legal services. If I can be of any help to you or people you know, contact me as I would be pleased to provide tax/legal support.
Bob Beatson, 6-25-2014, 1:51 p.m. EST
Law Offices of Robert Beatson II, 9818 Glynshire Way, Potomac, MD 20854
Practice areas: Tax, business law, computer/high tech/biotech law,
intellectual property, trusts/estates/wills, real estate, litigation,
Licensed to practice law in: DC, MD, VA, and NY.
ABA Member since 1980