Marital planning inside a joint revocable trust can feel like alphabet soup. The “right” structure depends on your estate size, tax exposure, family dynamics (second marriages, young or adult children), and whether asset protection is a priority. Below is a quick, plain-English tour of the five most common approaches used when the first spouse passes, plus why professional guidance matters.
1) “All to the Surviving Spouse” (Survivor’s Trust)
How it works: Everything passes outright (or in a survivor’s sub-trust) to the surviving spouse, who can later amend the plan.
Upsides: Simple, flexible, and the entire estate is counted in the survivor’s estate (which can be fine if one exemption shelters everything). Assets in the survivor’s trust typically receive a basis adjustment at the survivor’s death.
Downsides: No guardrails. In a remarriage or blended-family scenario, the survivor can change beneficiaries. There’s also no asset protection for the deceased spouse’s share; creditors and lawsuits can reach it.
2) A/B Trusts (Survivor’s Trust + Bypass/Credit Shelter Trust)
How it works: At the first death, the trust splits by formula. Part goes to a Bypass (B) Trust (using the deceased spouse’s estate tax exemption); the rest goes to the Survivor’s (A) Trust (often using the marital deduction).
Upsides: Time-tested way to preserve each spouse’s estate tax exemption and to lock in the decedent’s chosen remainder beneficiaries. Can add asset-protection features for the survivor.
Downsides: Assets in the Bypass Trust usually do not get a second basis step-up at the survivor’s death, which can increase capital gains for heirs, something to weigh carefully with your advisor.
3) The Disclaimer Bypass Trust (“Wait-and-See”)
How it works: The plan first leaves everything to the survivor. Within 9 months of death, the survivor may disclaim (refuse) some or all of the decedent’s share into a pre-written Bypass Trust.
Upsides: Flexibility after death. If the estate has grown, tax laws shifted, or asset protection is needed, the survivor can “turn on” the Bypass Trust. The survivor can often serve as trustee and still access income and principal under HEMS standards.
Downsides: The disclaimer must be valid under state and federal law and completed within 9 months, before the survivor accepts or controls the assets. In blended families, a survivor might simply choose not to disclaim, defeating the original protections.
4) Survivor’s Trust + QTIP Marital Trust
How it works: At the first death, the survivor’s half (and separate property, if any) funds a Survivor’s Trust; the decedent’s half (and separate property) funds a QTIP Marital Trust for the survivor’s lifetime. A timely QTIP election on the estate tax return (Form 706) is required—generally within 9 months (often extendable 6 months).
Upsides: Strong balance of control and tax efficiency. Both the Survivor’s Trust assets and the QTIP assets typically receive a basis step-up when the survivor later dies, potentially reducing capital gains for heirs. The QTIP adds creditor and remarriage protection and ensures the decedent’s chosen beneficiaries ultimately inherit.
Downsides: Two sub-trusts to administer and the cost/complexity of filing the 706 to make the QTIP election.
5) The Clayton Election (A/B with Post-Death Flexibility)
How it works: The trust is drafted as A/B, but an independent executor decides—on the timely filed 706—how much of the decedent’s share to treat as QTIP (with step-up at the survivor’s death) and how much, if any, goes to the Bypass Trust.
Upsides: Significant post-death flexibility to optimize income tax (basis step-up) versus estate tax and asset protection. You can also pair this with portability planning and, where appropriate, a reverse QTIP for GST allocation.
Downsides: Requires an independent decision-maker, strict 706 timing (generally 9 months from death, with a possible 6-month extension), and professional coordination.
Which One Is “Best”?
There isn’t a universal winner. The right depends on a number of factors including:
- Estate size and asset mix: Fast-appreciating assets may favor QTIP for future basis step-up; low-gain or liquid assets may work fine in Bypass.
- Family structure: Blended families often need QTIP or Bypass guardrails to prevent accidental disinheritance.
- Risk tolerance and protection goals: Creditors, lawsuits, future divorce concerns.
- Administrative details: Simple now vs. flexibility later, and who will serve as trustee
- Deadlines: 9-month windows for disclaimers and QTIP/Clayton elections, with limited extensions.
Small decisions like trustee powers, distribution standards (HEMS vs. broader), and whether to give the survivor a limited power of appointment can have big consequences for taxes, protection, and family harmony. Add in filing requirements (Form 706), portability nuances, community vs. separate property, and strict timelines, and it’s easy to see why DIY or one-size-fits-all forms can miss the mark.
An experienced estate planning attorney can tailor your plan to protect your spouse, preserve your children’s inheritance, and optimize taxes without locking you into a structure that doesn’t fit. If you’re married (especially in a blended family or with a growing estate), taking this step will help to map out the right marital trust design for you.
If you, a friend, or a loved one needs help establishing or updating an estate plan, we’re here to help. Contact our Intake Department at 760-448-2220 or visit us online at www.geigerlawoffice.com/contact.cfm. We proudly serve families across California from our offices in Carlsbad (San Diego County) and Laguna Niguel (Orange County).
