Albuquerque Marital Trust Lawyer

A marital trust usually refers to a trust that is formed after the death of a spouse on behalf of the surviving spouse. The surviving spouse receives property from their deceased spouse (potentially along with community property) for their sole benefit and use, which allows the property to qualify for the couple’s unlimited marital deduction.

The surviving spouse is then allowed to designate whoever they want as a beneficiary of the remaining assets when they die. This arrangement ensures that the transfer of assets from the marital trust to the final beneficiaries counts as a gift from the surviving spouse, not the deceased one.

Marital trusts are commonly used as part of an A-B trust structure. These complicated two-part trusts have seen much less use over the past decade.

Because far fewer estates incur estate taxes, there is less of a need to preserve estate exemption amounts. However, a marital trust can still provide other benefits, especially if the couple elected to form a joint trust while both spouses were still living.

To understand whether a marital trust would be well-suited for your family situation, reach out to New Mexico Financial Law. An Albuquerque marital trust lawyer can meet with you during a no-obligation consultation to discuss the opportunities that one can offer.

Schedule your no-risk consultation today when you call us at 505-503-1637 or contact us online.

How an Albuquerque Marital Trust Attorney Can Help You With Long-Term Planning

Marital trusts are an ideal tool for certain families, especially those with an ultra-high net worth that is at risk of exceeding their lifetime exemption amounts for estate taxes. A marital trust can also provide peace of mind through continuous asset management in the event of a spouse’s death or incapacitation.

Forming a marital trust involves some very important questions, though. Some of the most important ones to go over with your Albuquerque marital trust attorney include:

• Are you in danger of exceeding your lifetime gift/estate tax exemption amount? As of 2025, the exemption is $13.99 million. Note that this amount can be combined to $27.98 million for couples, and there is portability to carry over unused amounts upon one spouse’s death (more on this later).
• Do you intend to give the surviving spouse complete control over the trust’s assets, including who they wish to designate as successor beneficiaries? If not, you may want to consider forming a qualified terminable interest property (QTIP) trust.
• Will your marital trust be formed from a joint living trust? These trusts are formed during the couple’s lifetime and hold community property. They can also hold separate property in sub-trusts.
• Who do you plan to name as beneficiaries for the remainder of your estate? Are some of these beneficiaries your grandchildren or otherwise 37.5 years younger than you? The age of your beneficiaries can affect the estate or generation-skipping transfer taxes they may have to pay.
• Do you intend to name the surviving spouse as trustee? Or would you rather have another person or business serve as an independent trustee?
• Will the marital trust be accompanied by a bypass trust (also sometimes called a credit shelter trust, residuary trust, or B trust)? This structure can fully preserve the deceased spouse’s lifetime estate tax exemption while reserving property for designated beneficiaries.
• What assets do you intend to place in the trust? Will all of the assets be jointly owned by the couple (New Mexico is a community property state, so many will be)? Or will some assets be designated as separate property?
• How much would you feel comfortable setting aside to pay for the trust’s administration costs?
• How much income or asset appreciation do you expect out of the marital trust’s asset portfolio over a long-term span of 10 – 30 years?
• How do you intend to incorporate the marital trust with your other estate plans, such as your will or transfer-on-death accounts?

Determining the answers to these questions may require a deep dive into your asset portfolio. It will also help you think more carefully about your overall estate plan and how your marital trust might fit within it.

During your consultation, your Albuquerque marital trust lawyer will listen closely to your goals, especially any long-term ones that will affect the future of your family. For example, it’s critical to be able to imagine what would happen to your assets after the first spouse dies and then what happens after both spouses are gone.

Meeting with an Albuquerque marital trust attorney will help you weigh all of these important considerations and then determine the optimal trust arrangements for your unique family and asset situation.

What Is an Albuquerque Marital Trust?

Before explaining a marital trust, it helps to explain what a trust is, more generally.

A trust is formed when a grantor transfers their ownership of assets to the trust. These assets can consist of publicly traded securities, retirement accounts, life insurance policies, closely held business property, real estate, and other holdings.

Once the trust assumes ownership of the assets, a trustee takes over their management. The trustee is responsible for handling the day-to-day affairs of the assets, ensuring tax obligations are met, and overseeing any distributions given to beneficiaries.

The beneficiaries may receive regular income distributions from the trust, and they are also entitled to split the remaining value of the trust once it expires.

As for a marital trust, specifically, it most commonly refers to a trust that is formed after the death of a spouse. The deceased spouse typically already has a living trust. Some or all of this trust transfers/converts to a marital trust, which lists the surviving spouse as the sole beneficiary.

This arrangement allows the contents of the trust to qualify for an unlimited marital deduction from estate taxes.

In a Typical Marital Trust, the Surviving Spouse Has Control of Assets Until Their Death

The surviving spouse usually has free rein over the assets in the marital trust. This designation is what allows them to claim the assets as their own, making the transfer qualify as an unlimited spousal gift from the decedent.

Because the assets are theirs, the surviving spouse is allowed to transfer, sell, or bequeath them to anyone they like. Under most circumstances, though, they will designate the assets for the couple’s original children and any other beneficiaries.

This election is usually done by the spouse after the trust has been funded. Otherwise, the assets may count as a “completed gift” to the final beneficiaries.

If a couple wants to restrict the usage of assets for their children, they can instead elect to create what is known as a qualified terminable interest property trust (QTIP). This special marital trust arrangement designates the assets to a beneficiary in advance.

In doing so, the assets are reserved for them, which can prevent them from being sold or spent down by the surviving spouse. The trust’s contributions are still allowed to qualify for the unlimited marital deduction, though, because the spouse still reserves the right to draw a lifetime of income from them, among other possible privileges.

Using an Albuquerque Marital Trust as Part of an A-B Trust Arrangement

Marital trusts are most often used in tandem with a bypass trust, referred to as an A-B trust arrangement. The two trusts (marital and bypass) are usually formed from the remains of a joint trust created while both spouses are alive.

Upon the death of the first spouse, their property is split off into two trusts: a B or bypass trust, and an A or marital trust.

The B trust is funded with the assets with a total value up to the deceased spouse’s lifetime estate exemption amount. The surviving spouse may be given an income from the bypass trust, but they are otherwise not allowed to touch the principal assets used to fund the trust (except maybe under special circumstances).

These assets are instead designated for the final beneficiaries, who receive them when the surviving spouse dies.

The deceased spouse will also fund an A trust, or marital trust, with any remaining property that did not go into the B trust. The couple’s community property and the surviving spouse’s separate property also go into this trust.

The surviving spouse is free to access the contents of this trust at any time, and they may elect to receive regular distributions from the trust’s income.

A couple also has the option to just form a marital trust, rather than going through the process of forming a joint trust during their lifetime. They can also form a joint trust that converts into a marital trust without a bypass trust.

There are many possible variations on the classic A-B trust arrangement, so discuss the possibilities with an Albuquerque marital trust lawyer to determine which option might be best for your family situation.

Distributions From a Marital Trust Can Count as Part of an Unlimited Spousal Gift

While the spouse is alive, any distributions given to them qualify for an unlimited marital deduction — even if they technically come from income or growth generated from the trust’s principal. The surviving spouse has to pay income tax on any taxable income or capital gains generated from the sale of trust assets, but they will not be assessed an estate tax on top of that.

When the surviving spouse dies, their beneficiaries inherit the remaining assets and might end up paying estate taxes if the total value of the transfer to all beneficiaries exceeds the surviving spouse’s lifetime exemption amount (plus any remaining portability).

Step-Up in Basis Is Allowed for a Marital Trust But Not a B Trust

Another important concept to note is that any assets inherited from a marital trust have their procurement value adjusted to the time of the transfer. This adjustment is known as a “step-up in basis.” It affects the amount of capital gains assessed if the assets are later sold or transferred.

For example, let’s say a brokerage account was worth $100,000 when it was first funded while the couple was married. When a spouse died, the account was worth $250,000. When the surviving spouse died, it was worth $600,000.

Because of the step-up in basis, the beneficiaries of the trust receive the brokerage account as if it were always worth $600,000. That means that if they liquidated the account in its entirety, they would not owe any additional capital gains taxes.

This arrangement differs from a B/bypass/credit shelter trust. In that situation, only the surviving spouse receives a step-up in basis at the time of the other spouse’s death. The beneficiaries are then responsible for covering any capital gains taxes assessed on the growth of the account after that point.

Therefore, if a similar situation to the above happened but with a bypass trust, when beneficiaries inherit the account, they are already on the hook for $350,000 of capital gains should they decide to sell the portfolio.

Consider these rules when arranging your own marital trust or A-B trust configuration. With the help of an Albuquerque marital trust law firm, you can understand any resulting tax burdens that may end up falling on your beneficiaries.

Portability and Remarriages

Another factor that has caused marital trusts to become less popular is that laws were passed to give spouses “portability” for their estate tax exemptions. More formally known as a deceased spousal unused exclusion (DSUE), this rule allows the surviving spouse to take on any unused estate tax exemption left over when another spouse dies.

For instance, let’s say a couple has not used any of their lifetime exemption amount. They elect to fund a bypass trust worth $10 million, which goes into effect when one spouse dies.

That spouse’s remaining $3.9 million exemption passes onto the surviving spouse, who now has up to $17.89 million they can gift or bequeath to loved ones without causing a resulting gift/estate tax.

However, couples may wish to preserve this exemption using a credit shelter trust in case the surviving spouse remarries. The portability rule only applies to the most recent deceased spouse’s remaining exemption.

Therefore, if the surviving spouse remarries and then this new spouse dies, the surviving spouse can only use that second spouse’s remaining exemption, not the first one’s.

Get Help Planning for Your Family’s Future With an Albuquerque Marital Trust Law Firm

Thinking about what would happen when a member of a couple passes on can be unpleasant, but it’s important to consider the financial and legal implications of this situation. The last thing you would want to do is leave a surviving spouse with lingering questions about what happens to your mutual estate.

Forming a marital trust (or making other beneficial trust arrangements) can give you both peace of mind. By knowing what happens in the future — and knowing that either spouse would be provided for — you can ensure that your legacy provides well for all of your most beloved family members.

Learn how you can create the optimal arrangements at our Albuquerque trust law firm. Call 505-503-1637 or contact us online to schedule a no-obligation case review.