Welcome back to Absolute Trust Talk with Kirsten Howe and associate attorney Jessica Colbert! In this second episode of our AB Trust series, we dive into a vital question: Will your wishes truly be honored? While AB Trusts are a common estate planning tool for couples, they have potential challenges. One significant issue is when the deceased spouse’s wishes are unintentionally—or even deliberately—overlooked or altered. Tune in as we explore how and why this happens and, more importantly, what steps you can take to ensure that your estate plan works exactly as intended.
Time-stamped Show Notes:
0:00 Introduction
0:20 Recap: A quick refresher on what AB Trusts are and why they’re such a critical part of estate planning for many couples.
1:07 Many couples believe their AB Trust fully protects their estate, but here’s why that might not be the case—and what you should look out for.
1:56 Concerned about how your trust will be managed after you’re gone? Discover key safeguards that can help protect your estate plan from unwanted changes.
2:48 When is it time to consider hiring a professional trustee? This segment breaks down the scenarios where expert help is essential.
3:23 The bottom line: Every estate plan is unique. Be sure to consult with your attorney to ensure your AB Trust is tailored to your specific needs and offers the right protections for your family.
Transcript:
Hello and welcome to Absolute Trust Talk. This is our video podcast at Absolute Trust Counsel. I’m Kirsten Howe, and one of our associate attorneys, Jessica Colbert, is joining me. We’re talking about the topic of AB trusts—do you have one, do you need one? This is the second episode in what I think is a little mini-series on this topic. We did talk about AB trusts a little bit last time.
Jessica, why don’t you refresh us a little bit on AB trust, so we make sure everybody listening today is caught up?
An AB Trust is a trust where, on the death of the first spouse, your one singular trust is split into two trusts. There’s the survivor’s share and the deceased spouse’s share. The surviving spouse can do whatever they want with their survivor’s share. They can update it, and they can change the beneficiaries, but they cannot do that with the deceased spouse’s share. In that way, there’s control of the deceased spouse’s share of trust assets.
Families might want this control for a variety of reasons. If it’s a blended family and there are kids from prior relationships, they might want to control the deceased spouse’s assets to make sure that the surviving spouse doesn’t change the beneficiaries, so their kids aren’t getting anything. There might be concerns about, later in life, the survivor being prone to some undue influence, changing the estate plan in ways that they might not like.
However, just having the trust structure doesn’t necessarily protect the AB trust from those concerns. Oftentimes, the trust is set up so that the surviving spouse is the trustee of the deceased spouse’s share. If that’s the case, then the surviving spouse can manage and spend the assets however they want, and they aren’t under the supervision of someone.
Yes, I want to clarify that there typically are rules—guidelines—for what the surviving spouse can do with the deceased spouse’s legal share. But as a practical matter, if you have the person who’s supposed to be following those rules in control, as a practical matter, it might get a little blurry. It might get a little, I don’t want to say, subject to abuse by the surviving spouse, but things happen.
Sometimes, we will put in additional protections when we have an AB trust. The clients want an AB trust, and they really want to make sure the surviving spouse doesn’t change the estate plan or do something that’s not correct. For example, Jessica, what ideas do you have about that?
You could make it so that someone other than the surviving spouse is the trustee of the deceased spouse’s irrevocable trust. Or, it could be adding a co-trustee—someone else to serve with the surviving spouse, so they have to make those decisions together. Another option is naming someone who will receive an accounting even if the surviving spouse is the trustee or the sole trustee.
In that way, the surviving spouse must report to someone else what’s being spent and what’s coming in and out of that trust so someone else can keep an eye on what’s happening with those assets. It can be something like naming your children. Your children would be motivated to keep an eye on what’s happening with things they will eventually inherit.
All of these things can work, but they can also be fraud. Suppose you have, for example, a stepparent who is the surviving spouse, and the children are supposed to be policing and watching. In that case, this is maybe a good situation for a professional trustee, a disinterested trustee who will follow the rules of the trust and still make sure the surviving spouse is ok. It’s not their job to ensure the children’s inheritance is maximized, but it’s just something to consider. These situations, especially in a blended family, require a lot of thought and care.
Anyway, the bottom line here, the point of this episode, is that just having that AB structure doesn’t necessarily prevent the surviving spouse from doing things that you might not want him or her to do. So, it’s important to talk to your attorney about exactly what you want and the best way to ensure that happens.
Thanks, Jessica. That was very good. I hope you all learned a lot today. We’ll continue this conversation in our next episode. I look forward to connecting with you next time.
Resources Related to This Episode:
- Absolute Trust Talk Episode 151: Is an AB Trust Right for You? Essential Insights for Married Couples https://absolutetrustcounsel.com/151-is-an-ab-trust-right-for-you-essential-insights-for-married-couples/
- Absolute Trust Talk Episode 105: AB Trusts: Do You Have One? If So, Do You Still Need One? https://absolutetrustcounsel.com/105-ab-trusts-do-you-have-one-if-so-do-you-still-need-one/
- A Will is Not Enough – Securing Your Legacy with Estate Planning Life can change in an instant. A will is not enough to be prepared. Get free access to our actionable E-book Guidebook #1 and start protecting your legacy today. https://absolutetrustcounsel.com/guidebooks/
- Learn how to comfortably define gray areas and assess your own unique needs to effortlessly build a secure future now. Check out Guidebook #2, Estate Planning Beyond the Basics, here > https://absolutetrustcounsel.com/guidebooks/
- Get our free introductory guide to the most used estate planning tool, family trusts, and understand how we plan to help protect your family. Guidebook #3: https://absolutetrustcounsel.com/guidebooks/
- Absolute Trust Counsel would love to offer access to our Incapacity Planning resource page: https://AbsoluteTrustCounsel.com/Incapacity-Planning/. We’ve collected our top planning information all in one place so listeners can find videos, guidebooks, blog posts, and a host of information with tips and strategies on implementing, planning, and protecting themselves and their loved ones.
- We’re pleased to provide a library of e-books to address common estate planning questions and concerns in practical, easy-to-understand language. https://AbsoluteTrustCounsel.com/Resources/.
- ASK KIRSTEN: If you’d like Kirsten to answer your question on the air, please email her at Info@AbsoluteTrustCounsel.com.
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