I am remarried with 3 grown children. A family trust is in place where it splits into a survivor's trust to wife (unlimited) and exemption trust available to spouse for health/support, beneficiaries my children. How can I safeguard the exemption trust from my surviving wife's next husband? i.e. create a "lock box". In community property state.
Lot's of issues. Assets that are solely yours could be transferred to a family trust (also called by pass trust, applicable exclusion trust, exemption trust, and so on). That trust could limit your wife's access to fund to the discretion of an independent trustee. If distributions are discretionary and the trustee is sensitive to your concerns over your spouse remarrying, the trustee could intentionally limit distributions if he/she felt the funds were winding their way to benefit a new husband, instead of your surviving wife. You could also include limiting distribution standards in the trust, such as the funds can only be distributed to your surviving spouse (wife) for her maintenance and support in accordance with her ascertainable standard of living after consideration of her other resources. There are a myriad of other ways to limit distributions. These limitations may also serve to limit what a new husband can get. A strong independent trustee may be essential to carrying out your goals, whatever options you use.
There may be some extra benefit to creating a family limited partner or family limited liability company to own assets. The use of an entity, which in turn is partially held by a trust, may give you two layers of protection. Again, review this with local counsel.
Whether you can go so far as to change your wife's right to access the money in the event she remarries will raise issues of public policy. These are issues that the court deems so significant that the court will address them and not relegate them to personal decision making. For example, a provision stating that your wife would be cut off from any distributions if she remarries may be viewed by some as a violation of public policy to uphold each person's right to marry, etc. This is a matter of state law and one that would have to be confirmed by your estate planning attorney in your state.
In a community property state assets acquired during the marriage may not be able to be limited in the same manner. You have to check with an estate planning attorney in YOUR community property state to determine what the law is in your state. This might make it more difficult to place restrictions on such assets, but check with local counsel.
Finally, there is a personal issue to all of this. How will your wife, family and friends view a provision that limits your wife's right to access assets simply because she remarries (if that is in fact what you intend). Think carefully about that impact. Finally, if you really love her, how far do you want to limit her? The personal aspects of these issues are tough and also should be addressed as you plan.
Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.