05 Apr Can my wife access my trust?
Q. I inherited money in a trust. It names only me and not my wife, and after that it goes to my kids. Can I do anything to make sure my wife has access to this money if I die?
— Planning ahead
A. Trusts are established to guarantee a person’s assets are distributed as they wish after they die.
So can you make changes to this trust?
Not really, said Andrew Novick, a certified financial planner and estate planning attorney with The Investment Connection and Brookner Law Offices in Bridgewater.
He said there are three parties to every trust – the grantor puts money into the trust, the beneficiary benefits from the trust, and the trustee controls the trust assets.
“Within the trust document, the grantor will have provided instructions regarding distribution of trust assets to the beneficiary and the trustee has a fiduciary duty to follow these instructions,” Novick said. “It is not unusual for a trust to be established for the benefit of the grantor’s lineal descendants only.”
Spouses of descendants are rarely included as beneficiaries, he said, and because your wife is not named as a trust beneficiary, the trustee has no right to distribute trust assets to her.
Some trusts give the beneficiary what is known as a power of appointment.
Novick said a “general” power allows you to appoint the trust property to any person at your death by referencing this power in your will, so this would allow you to leave the trust to your wife.
A “limited” power of appointment is used more often, he said. This only allows you to direct the trust to a limited class of people. While possible, it is unusual for the class to include spouses of descendants, Novick said. If the trust document is silent about this issue, you most likely do not have any control over the trust at your death.
If your children become the trust beneficiaries after your death and they are still minors at the time, your wife may still benefit from the trust in roundabout manner, Novick said.
“She won’t have direct access to the trust assets, but assuming that she is also the children’s mother, she’ll benefit because the trust can probably help cover some expenses related to the children, although any distributions to the children still depend on the trust’s terms,” he said.
You can also look at the trust’s distribution provisions while you are alive.
Novick said such provisions can vary greatly based on the grantor’s wishes.
“Typical provisions call for mandatory income and principal distributions for health, education, maintenance, or support, but the trustee may have discretion to distribute income/principal for any reason and you may have the ability to demand certain distributions for any reason,” he said. “Any trust assets distributed to you that are not used can be put into an account that can be left to your wife at your death.”
Gaining a clear understanding of the trust’s terms is critical, so you may need to see qualified estate attorney for help.
A financial planner can also help review your overall financial situation and look at ways to make sure your wife will have enough financial resources if she can’t access the trust after your death.
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This post was first published on April 5, 2017.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.