Marital Trust In Georgia: What They Are And How To Set One Up

Marital Trusts In Georgia - What Is A Marital Trust - How To Set Up A Marital Trust In Georgia

What is a marital trust in Georgia and how do they work? 

In this article, you’ll learn about: 

  • what a marital trust is
  • how a marital trust works
  • how to set up a marital trust
  • pros and cons of marital trusts
  • types of marital trusts
  • how to distribute income from marital trusts

Let’s dig in.

Table of Contents

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What Is A Marital Trust?

A marital trust in Georgia is a legal arrangement that a person creates to transfer assets to their spouse after their death. 

It provides the surviving spouse with financial support and potentially offers significant tax benefits. 

There are two types of marital trusts common in Georgia: 

  • AB Trusts 
  • QTIP Trusts  (Qualified Terminable Interest Property)

An AB Trust, also known as a bypass trust, splits into two upon the death of the first spouse. 

The deceased spouse’s half goes into a “B Trust.” 

This provides income to the surviving spouse but keeps the principal intact for beneficiaries, often children. 

The surviving spouse’s half goes into an “A Trust,” which the spouse can use as they please.

A QTIP (Qualified Terminable Interest Property) Trust allows the first spouse to die to control how the assets are eventually distributed after the death of the second spouse. 

The surviving spouse receives income from the trust during their lifetime but doesn’t have control over the principal.

In both types, the trust’s assets bypass the surviving spouse’s estate, reducing or eliminating estate taxes. 

To set up a marital trust in Georgia, it’s important to work with an experienced estate planning attorney who:

  • understands the nuances of state law 
  • can guide you through the process

Read More: What Has To Go Through Probate In Georgia

Importance Of Marital Trusts In Georgia

Marital trusts in Georgia are an essential tool for estate planning. 

First, they provide financial security to the surviving spouse after one’s passing. 

By placing assets in the trust, the surviving spouse gets the benefit of the income generated from those assets.

Secondly, they offer significant tax benefits. 

Assets transferred into a marital trust can qualify for the unlimited marital deduction.

This reduces or even eliminates federal estate taxes upon the death of the first spouse. 

This tax advantage allows more wealth to pass directly to the beneficiaries.

Lastly, they aid in managing the estate’s assets. 

The trust is managed by a trustee who handles administrative duties like:

  • managing investments 
  • preparing tax returns 

This can relieve the surviving spouse from the burden of these tasks and ensure professional handling of the assets.

In essence, marital trusts in Georgia are vital in:

  • safeguarding a spouse’s financial future
  • optimizing tax efficiencies
  • managing the estate effectively

Read More: How To Set Up A Trust In Georgia

How Does A Marital Trust Work In Georgia?

A marital trust in Georgia is a legal arrangement created to protect and manage assets for the benefit of a surviving spouse. 

When one spouse passes away, assets move into the trust. 

The surviving spouse becomes the beneficiary.

The trustee, chosen beforehand, manages the trust. 

This can be the surviving spouse or a third party, like our trust lawyers

The trustee makes sure the assets provide for the beneficiary’s needs.

Assets in a marital trust often include cash, stocks, bonds, real estate, and personal belongings. 

The specifics depend on the couple’s wishes and financial situation.

The main advantage of a marital trust is its tax benefits. 

Assets transferred into the trust are exempt from estate tax until the surviving spouse passes away.

Marital trusts in Georgia follow state and federal laws. 

These laws ensure the trust functions as intended and provides for the surviving spouse.

Finally, it’s essential to review the marital trust periodically. 

Life changes may require updates to the trust to:

  • maintain its effectiveness 
  • provide the maximum benefit

Read More: Who Needs A Trust Instead Of A Will?

How To Set Up A Marital Trust In Georgia

Here are the steps to set up a marital trust in Georgia:

  1. Identify Your Needs: Determine the reasons you want a marital trust. This could be for tax benefits, to provide for a surviving spouse, or manage your estate.
  2. Consult an Estate Planning Attorney: Reach out to an attorney who specializes in estate planning. They will guide you through the process and ensure you follow Georgia’s laws.
  3. Choose the Type of Marital Trust: Discuss with your trust attorney the types of marital trusts available. This could be a QTIP Trust, QDOT Trust, or AB Trust. The choice depends on your specific circumstances and needs.
  4. Draft the Trust Document: Your attorney will help draft the trust document. This outlines the terms of the trust, who the trustee is, and who the beneficiaries are.
  5. Review the Document: Read through the trust document carefully. Make sure it reflects your wishes and meets your needs.
  6. Sign the Document: Once satisfied with the document, sign it in the presence of your attorney. Georgia law also requires witness signatures.
  7. Transfer Assets: After signing the document, you can start transferring assets into the trust. This process varies depending on the asset type.
  8. Maintain the Trust: Review and update the trust as needed. It’s essential to keep the trust current with changes in your life or the law.

Read More: Does Your House Have To Be Paid Off To Put It In A Trust

Marital Trust Requirements

A marital trust in Georgia requires the following:

  • Two Parties: You need a grantor, the person creating the trust, and a trustee, the person managing the trust. The grantor can also act as the trustee.
  • Spouse as Beneficiary: The primary beneficiary of a marital trust should be the surviving spouse. This means all income generated by the trust, at a minimum, should be payable to the spouse during their lifetime.
  • Proper Documentation: You must draft a trust document outlining the terms of the trust. This should include details about trust management, distribution of income, and what happens upon the death of the surviving spouse.
  • Trust Property: You need to identify and transfer assets into the trust. The trust document should clearly list these assets.
  • Legal Execution: The trust document must be signed and notarized as per Georgia’s laws. This finalizes the trust’s creation.
  • Irrevocability: After the death of the first spouse, the trust typically becomes irrevocable, meaning the terms of the trust can’t be changed.

Read More: How To Put House In Trust With Mortgage

Pros And Cons Of Marital Trust

Pros of Marital Trusts:

  • Spousal Provision: Marital trusts ensure the surviving spouse is financially secure, receiving income from the trust’s assets during their lifetime.
  • Tax Advantages: Assets in marital trusts are exempt from estate taxes upon the death of the first spouse, which can result in significant tax savings.
  • Control Over Assets: The trustor can specify how the trust’s assets are managed and distributed after the death of the surviving spouse, protecting the interests of other beneficiaries, such as children from a previous marriage.
  • Protection from Creditors: In certain cases, marital trusts can protect assets from the creditors of the surviving spouse, preserving the estate for future generations.

Cons of Marital Trusts:

  • Cost and Complexity: Setting up a marital trust can be expensive due to attorney fees, and the legal and financial concepts can be complex to understand and manage.
  • Limited Accessibility: Although the surviving spouse receives income from the trust, they might have limited access to the trust’s principal, depending on the terms of the trust.
  • Irrevocability: Certain types of marital trusts are irrevocable, meaning once established, they cannot be altered or dissolved without the consent of the trustee and the beneficiaries.
  • Potential Conflict: If the trustee and beneficiaries are different parties, conflicts may arise about the trust’s management.

Read More: How Long Does An Executor Have To Settle An Estate In Georgia

Types Of Types Of Marital Trusts In Georgia

Here are the primary types of marital trusts used in estate planning in Georgia:

  • Marital Deduction Trusts (A-B Trusts): When one spouse dies, the trust splits into two: the “Survivor’s Trust” (A Trust) for the surviving spouse and the “Bypass Trust” (B Trust) for other beneficiaries. This structure maximizes estate tax exemptions.
  • QTIP Trusts (Qualified Terminable Interest Property Trusts): These trusts ensure the surviving spouse receives income from the trust’s assets during their lifetime. After the surviving spouse dies, the remaining assets go to other named beneficiaries.
  • QDOT Trusts (Qualified Domestic Trusts): If one spouse isn’t a U.S. citizen, a QDOT trust allows deferral of estate taxes until the non-citizen spouse’s death.

Read More: What Are The Disadvantages Of Putting Your House In A Trust?

Marital Trust vs Family Trust

The primary difference between a Family Trust and a Marital Trust lies in:

  • their specific purposes 
  • the beneficiaries they’re intended to serve

A Family Trust in Georgia aims to manage and protect assets for the benefit of an entire family. 

This can include spouses, children, grandchildren, or other relatives. 

The trustor has control over the distribution of assets.

And this type of trust is often used to ensure that assets are handled according to the trustor’s wishes, even after their death.

A Marital Trust, on the other hand, is designed specifically to benefit the surviving spouse after the other spouse passes away. 

The main purpose is to provide financial security for the surviving spouse, while also taking advantage of certain estate tax benefits.

Read More: How To Put A House In A Trust

Marital Trust vs Survivors Trust

A Survivor’s Trust is created from an A-B trust structure. 

When one spouse dies, the original trust (often a revocable living trust) splits into two: 

  • the Survivor’s Trust 
  • the Bypass Trust (or Credit Shelter Trust) 

The Survivor’s Trust contains the surviving spouse’s property and any property the deceased spouse gives to the survivor outright. 

The surviving spouse typically has full control over this trust, including the power to spend down the principal and change beneficiaries.

On the other hand, a Marital Trust, also known as an A-B trust, is a type of trust structure used by married couples to minimize estate taxes. 

When the first spouse dies, the trust splits into two trusts: the Survivor’s Trust (or ‘A’ Trust) and the Bypass Trust (or ‘B’ Trust). 

The Marital Trust, in this case, refers to the overall structure of the A-B trust, not a separate entity.

Read More: What Assets Cannot Be Placed In A Trust?

Marital Trusts vs Marital Deduction Trust

A marital trust and a marital deduction trust are not exactly the same, but they are closely related. 

A marital trust is a general term for trusts set up to provide financial benefits to a surviving spouse. 

A marital deduction trust, on the other hand, is a specific type of marital trust.

Its main purpose is to take advantage of the unlimited marital deduction in U.S. federal estate tax law. 

This means assets transferred into a marital deduction trust, and subsequently to a surviving spouse, aren’t subject to estate taxes at the time of the first spouse’s death. 

Instead, the tax liability is deferred until the surviving spouse’s death.

So, in essence, a marital deduction trust is a type of marital trust designed with a particular tax strategy in mind. 

It helps to maximize the estate’s value by deferring estate taxes until the second spouse’s death.

Read More: What Happens To A House In A Trust After Death?

Marital Trust Income Distributions

Here’s an explanation of income distributions from a marital trust.

In a marital trust, the surviving spouse typically has the right to the trust’s income. 

This income is usually distributed at least annually. 

The trust income might consist of interest, dividends, rents, or other types of earnings that the trust’s assets generate.

In some cases, the terms of the trust might also allow the trustee to distribute the principal (the original assets put into the trust) to the surviving spouse. 

This is often in situations where the income is insufficient for the spouse’s needs, as defined by the trust agreement.

After the death of the surviving spouse, the remaining trust assets (both income and principal) are distributed to the final beneficiaries, usually the couple’s children or other heirs.

In terms of taxation, the surviving spouse is generally responsible for the income tax on the income distributed from the trust. 

However, if the trust retains some income (doesn’t distribute it), the trust itself may be responsible for the income tax on that undistributed income.

Read More: How Much Money Do You Need To Start A Trust Fund For A Child?

Does A Marital Trust File A Tax Return?

Yes, a marital trust does indeed need to file a tax return.

A marital trust becomes a separate entity upon the death of the first spouse. 

From this point, the trust must file an annual fiduciary income tax return, IRS Form 1041

This form reports the trust’s income, deductions, and any credits.

The trust only pays income tax on income retained by the trust. 

If the income is distributed to beneficiaries, it’s the beneficiaries who are responsible for the tax. 

The trust should provide the beneficiaries with a Schedule K-1 detailing the income distribution, which the beneficiaries then report on their personal tax returns.

State-specific tax filing requirements for trusts may also apply, so it’s wise to review those rules. 

The IRS Form 1041 instructions and a qualified professional can provide more guidance.

Read More: How Much Does A Living Trust Cost?

FAQs About Marital Trusts In Georgia

Here are other questions our clients ask us about marital trusts in Georgia.

Is A Marital Trust Revocable Or Irrevocable?

A Marital Trust becomes irrevocable upon the death of the first spouse. 

Initially, while both spouses are alive, they can make changes to the terms of the trust, such as the named beneficiaries or the distribution of assets. 

This makes the trust revocable during this period.

However, once the first spouse passes away, the terms of the Marital Trust cannot be altered. 

This means the trust becomes irrevocable, and the surviving spouse cannot make changes. 

The trust’s assets are typically used to provide income for the surviving spouse, and upon their death, the remaining assets are passed on to the beneficiaries as outlined in the trust agreement.

Read More: How To Set Up A Family Trust

Does Marriage Override A Trust?

Marriage does not typically override a trust. 

A trust is a legal arrangement, and its terms continue to apply regardless of marital status unless the trust document explicitly states otherwise.

When a trust is created, the grantor lays out specific terms and conditions about how the trust assets should be managed and distributed. 

These terms stay in place even if the grantor gets married after the trust is established.

However, if you get married and wish to include your spouse in your trust, you may need to modify the trust or create a new one. 

A spouse may have a legal right to claim a portion of your estate (known as a “spousal elective share”) despite what your trust or will states.

Get A Georgia Marital Trust Set Up

If you want to set up a marital trust, fill out the form below. 

At The Hive Law, we understand the importance of:

  • protecting your hard-earned assets 
  • ensuring your family’s future
  • not losing everything to creditors and lawsuits
  • properly (and legally) distributing assets 

We only accommodate a limited number of clients each month.

So don’t miss your opportunity to work with our trust fund lawyers.

Benefits of our trust services:

  • Tailored solutions to fit your unique needs and goals
  • Expert guidance in navigating complex tax and legal matters
  • Preservation of your wealth for future generations
  • Streamlined asset distribution according to your wishes

Avoid the pitfalls of inadequate estate planning strategies:

  • Creditors seizing your assets
  • Lawsuits jeopardizing your family’s financial security
  • Family disputes over inheritance
  • Costly and time-consuming probate processes

Talk soon.

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