Q My husband and I are having an argument that I hope you can help us resolve. We have a trust and all our assets have been accumulated through our lives together. It is all community property. If my husband goes first, he is concerned that I will change our trust and his nieces and the charities he likes will not get anything from him. I have assured him that I would not do this but now I’m concerned that if I were the one to go first, he might change the document to cut out the charities I love!

Should we have these concerns? Do happily married couples change documents when a spouse is gone or are we just making up problems?

A Your question is a good one but is somewhat difficult to answer since trust documents vary so widely from person to person. If your trust is set up so that when one of you dies, the trust continues for the benefit of the surviving spouse, all assets continue to be fully available for the spouse and the spouse retains the authority to amend (change) the trust, then yes, technically you or your husband could change it to cut out “your” beneficiaries.

There are ways you can assure yourself this will not happen, but these changes could adversely affect the surviving spouse. One option is that on the first spouse’s death one-half of the community assets go into a trust and this newly created trust is irrevocable. The surviving spouse could not make changes to the newly created irrevocable trust, but the assets can remain available for their benefit under certain circumstances. The remainder beneficiaries, in your husband’s case his nieces and charities, could not be changed or “cut out.”

The new irrevocable trust would need to file income tax returns each year and there are other reporting requirements that the surviving spouse must meet, like sending an accounting of the trust’s assets to the remainder beneficiaries yearly. This means that if your husband goes first, you will need to report to his nieces and charities each year and show them that you are holding that trust according to its terms. If you were to begin using the assets, the nieces or charities could ask questions of you about “your half” of the assets and why you need your husband’s assets. Not very attractive, right?

Another option is that if your husband dies first, on his death certain amounts are given to his nieces and the charities. If you can afford to give away assets on the first death, then the remaining trust assets after the second death can be given in any way the surviving spouse wishes. The first spouse to go will have peace of mind knowing that at least something went to their chosen beneficiaries. If you die first, the situation is reversed. Your beneficiaries get something right away and then he can leave whatever is left to his beneficiaries.

Leaving your trust open and flexible will ensure that the surviving spouse has full access to the money you two made together and it is assumed you each want the other to live comfortably, right? If there are funds left after both of you have passed and the beneficiaries get something, great! I recommend that you continue to trust each other and leave the trust and beneficiaries as they are. This gives you the most privacy, flexibility and comfort.

Liza Horvath has over 30 years of experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust Management Company. This is not intended to be legal or tax advice. If you have a question call (831) 646-5262 or email liza@montereytrust.com