Can You Split Your Trust?

A trust is a legal entity created to hold assets for the benefit of one or more beneficiaries. If you contemplate adding a trust to your estate plan, you may wonder if there are any situations where you can split your trust if necessary. Under what conditions would a split, if allowed, help achieve your estate planning goals? In this article, we will look at several ways to split a trust.

Split Your Trust with a Charity

Some trusts are called split interest trusts because they serve two purposes.  For example, a charitable remainder trust works as follows:

  • Trust income is first dispersed to the grantor, usually in the form of an annuity; and
  • At the termination of the trust, the remaining trust assets are distributed to charity.

A grantor might want to create a charitable remainder trust to reduce the worth of his or her taxable estate, to provide a retirement income through the annuity payments, and to give back to the community.

Another type of split interest trust is a charitable lead trust, which works in a somewhat opposite fashion.  The trustee distributes a series of payments to charity and then ultimately distributes the remaining trust assets to chosen beneficiaries (typically individuals).

Some trusts are created with other benefits in mind.

Trusts That Split After Death

Married couples may worry about how a surviving spouse will fare upon the other spouse’s death. A couple with a blended family may be concerned about their children’s inheritance being squandered by a surviving spouse. Fortunately, trusts may alleviate some of these concerns.

  • A/B Trusts. This is a type of trust that splits upon the first spouse’s death. In the past, these were typically created to provide estate tax relief. After the death of the first spouse, an amount equal to the unused estate tax exemption amount transfers to an irrevocable trust called the B trust (Bypass Trust). The remainder passes to the A trust, which may be controlled by the surviving spouse. Estate tax is not paid until the death of the surviving spouse.
  • QTIP Trusts. Sometimes one spouse wants to protect an inheritance for his or her children while providing for the surviving spouse. A Qualified Terminable Interest Property Trust allows a grantor to do just that. The QTIP trust is a type of trust often used with blended families. At the grantor’s death, trust assets do not pass directly to the surviving spouse. Instead, he or she receives periodic payments from the trust. At the surviving spouse’s death, the trust assets pass to beneficiaries according to the terms of the trust. Often, this is the grantor’s children from a previous marriage.

Learn More About Trusts

It is also possible to split your trust for other reasons. However, estate planning tools like trusts are complicated. If mishandled, unintended consequences can be costly.

At Law Offices of John Mangan, P.A., we’ve helped many clients develop comprehensive estate plans that meet their goals and needs. We can set up an appointment for you if you just call 772-324-9050 or use our convenient Contact Form.

Located in Palm City, the Law Offices of John Mangan, P.A. also serves clients in Stuart, Hobe Sound, Jupiter, and Port St. Lucie.

Written by John Mangan, Esq.

John Mangan, Esq.

I’m an attorney in Palm City, FL, and I serve clients throughout Martin County, including Stuart, Palm City, Hobe Sound, and Indiantown, as well as those in St. Lucie County, the Treasure Coast, Palm Beach County, and other parts of Florida. The Law Offices of John Mangan, P.A., is an innovative firm providing estate planning services to clients in Florida. We focus primarily on wills, trusts, asset protection, guardianship, and probate administration.