If you were to die, your spouse may automatically inherit your assets. However, once your spouse passes away, any remaining assets in the estate would have to go to probate before they're distributed. This is where a court representative pays any outstanding debts and makes sure your heirs receive their share, but it is associated with hefty fees. With a living trust between a husband and wife, your beneficiaries may receive their portion of your estate much faster and it will cost less money, so that most of what you leave is transferred according to your wishes.
A living trust also is referred to as a revocable living trust. This means that it may be changed and the assets in it managed during the lifetime of the trustees, which are you and your spouse. Once both of you pass away, the trustee changes to your beneficiary and the executor ensures that all of your assets maintained in the trust are distributed or continued to be managed.
In order for the trust to hold assets, they must be transferred into it. Therefore, all bank accounts, life insurance policies and real estate deeds, for example, must be placed into the trust by completing the necessary forms and documents to do so. An attorney may assist you with this task.
If there is a life change, it can be reflected in the trust. Because of its revocable nature, a husband and wife trust can be revised if one spouse dies and the other remarries or there is a divorce prior to one of the trustees passing away. If you or your spouse changes your mind about beneficiaries, they may be added or removed without impacting the assets in the trust. An advantage to having a living trust with your spouse is the flexibility with which you may manage it.
When your estate goes to probate to be administered, it may take months or years before it is settled. During that time, attorney's fees and court costs can eat up a large portion of the estate that you worked hard to amass during your lifetime. Attorney's fees and executor charges can be extreme and, if your estate is not large, very little of it may be transferred to your heirs in the end. Your trustees will be paid through your trust because there may be some work to do before your assets can be distributed, but they may waive the fee. For example, the trust may need to file income taxes and assets may need to be transferred out of the trust to beneficiaries.
If you and your spouse want to state your wishes for the time that you pass, a will can serve this purpose, but is not as efficient as a trust. A will is sent to a probate court to be proven valid. However, just because you and your spouse have a living trust doesn't mean that you don't need a will. Wills are used in conjunction with a trust to give more specific information about any minor children's guardianship or details on specific assets. If you neglect to transfer something into your trust, the will can do so after your death in order to be distributed to your beneficiaries.
- The 'Lectric Law Library: Avoiding Financial Disaster With A Living Trust
- Canadian Tax Foundation. "Recent Developments in Corporate Taxation." Accessed May 22, 2020.
- Government of Canada. "Preparing Returns for Deceased Persons 2019." Accessed May 22, 2020.
- Government of Canada. "Canadian Income Tax Rates For Individuals - Current and Previous Years." Accessed May 22, 2020.
- Government of Canada. "ARCHIVED - Testamentary Spouse Trusts." Accessed May 22, 2020.
- Government of Canada. "T3 Trust Guide – 2019." Accessed May 22, 2020.
- Library of Parliament. "Euthanasia and Assisted Suicide in Canada." Accessed May 22, 2020.
- Internal Revenue Service. "Instructions for Form 1041," Page 1. Accessed May 22, 2020.
Carol Deeb has been an editor and writer since 1988. Her work has appeared in magazines, newspapers and online publications, as well as a book on education. Deeb is a real-estate investor and business owner with professional experience in human resources. She holds a Bachelor of Arts in English from San Diego State University.