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Estate Planning Strategies to Protect Your SpouseYou found the love of your life, and as you have built your life together, you have likely weathered your fair share of storms and grown stronger because of them. Now that you are married, you are uniquely situated to provide meaningful support for your spouse after your passing through special estate planning tools available only to legally married individuals.
If one spouse individually owns more money or property than the other, a lifetime qualified terminable interest property (QTIP) trust allows the wealthier spouse (grantor spouse) to transfer money and property into the trust for the benefit of the less wealthy spouse (beneficiary spouse). This alternative is generally better than making outright gifts to a spouse because it may provide some creditor protection. A lifetime QTIP trust can also be a valuable strategy for couples in a second or subsequent marriage. During their lifetime, the beneficiary spouse will receive the income generated by trust assets and may also access trust principal for specific purposes such as healthcare, education, or other needs as defined by the grantor spouse. This structure allows the grantor spouse to provide for their partner during life while ultimately preserving the remaining assets for the grantor spouse’s children from a prior marriage or other chosen beneficiaries.
When the beneficiary spouse dies, the remaining property in the trust is included in their estate, making use of their unused federal estate tax exemption. If the beneficiary spouse dies first, the remaining trust property can continue (subject to applicable state law) for the grantor spouse’s benefit. If the lifetime QTIP trust is properly structured, any remaining trust assets may be excluded from the grantor spouse’s estate upon their death. After both spouses have passed, the remaining trust property is distributed to the beneficiaries designated by the grantor spouse when the trust was originally created.
Beginning in 2026, the federal estate and gift tax exemption will be permanently set at $15 million per person, adjusted for inflation. This gives married couples a combined exemption of up to $30 million—making tools like the lifetime QTIP even more valuable for maximizing the use of both spouses’ exemptions over time.
A lifetime QTIP trust can offer meaningful benefits, but it may have unintended effects if a marriage ends in divorce. Because the trust is irrevocable, the former spouse could remain entitled to income for life unless the trust specifically defines the beneficiary spouse as the current spouse. With thoughtful drafting and the help of an experienced estate planning attorney, you can ensure that the trust reflects your wishes even if life takes an unexpected turn.
A spousal lifetime access trust (SLAT) allows the grantor spouse to gift money or property into a trust for the benefit of the beneficiary spouse, protecting the money and property from creditors and estate tax while still allowing the grantor spouse to enjoy the money or property through the beneficiary spouse. Unlike a lifetime QTIP trust, this type of trust does not require that the beneficiary spouse be given access to the trust’s income. Instead, the beneficiary spouse may be given access to income or principal during their lifetime depending on the grantor spouse’s wishes. The goal of this strategy is to use the grantor spouse’s own estate tax exemption instead of the beneficiary spouse’s. Additionally, other beneficiaries, such as children or grandchildren, can be named as current beneficiaries of the trust.
The increased Federal exemption amount gives grantor spouses an expanded opportunity to gift substantial assets into a SLAT during their lifetime without triggering gift tax. This provides more flexibility and protection for families looking to transfer wealth efficiently.
Similar to lifetime QTIP trusts, SLATs also carry divorce-related risks. If you divorce, the beneficiary spouse retains access to property in the SLAT. However, the grantor spouse likely loses access to the trust upon divorce, as their only connection to the assets was indirectly through the beneficiary spouse. Since the SLAT is irrevocable, there is no way to undo the transfer or reclaim the assets. That is why many people include provisions limiting benefits to a current spouse or add other beneficiaries, such as children, to preserve flexibility.
Note: If both spouses want to use their own exemption during their lifetimes through estate planning tools such as SLATs, special attention needs to be paid to ensure that reciprocal trusts are not drafted, which could unwind all the planning. As experienced attorneys, we can help ensure that both spouses’ goals are met in the most tax-efficient manner.
If you and your spouse reside in or acquire property in a community property state, it is essential to determine the ownership interests in all property included in your estate plan. If community property is going to fund one of these trusts, it may be necessary to enter into a partition agreement or other marital agreement. Because this step may change the current ownership of the property, it is critical that you work with an experienced attorney who will explain the process and results.
With the permanent federal estate tax exemption set at $15 million per person beginning in 2026, you may still feel that estate tax strategies are only for the ultra-wealthy. However, asset growth, business ownership, or appreciating real estate may bring more families into the taxable estate threshold than expected—especially when inflation is considered. It's worth noting that the Minnesota exemption is much lower at $3 million, which also lacks portability. Proper planning is necessary for Minnesotans to take advantage of any tax savings that may be available.
Portability remains a critical tool under the One Big Beautiful Bill Act, signed into law on July 4, 2025. It allows a surviving spouse to use any unused portion of their deceased spouse’s federal estate and gift tax exclusion—known as the deceased spouse’s unused exclusion (DSUE) amount. This means that the surviving spouse can combine their own exclusion with what remains of their spouse’s, increasing the amount that can be transferred free of gift and estate tax.
However, to take advantage of portability, a federal estate tax return (Form 706) must still be timely filed (usually within nine months of the deceased spouse’s death, or longer if an extension has been granted) when the first spouse passes. Without this filing, the surviving spouse will lose the DSUE amount and will have only their own exemption amount to use.
Note: The DSUE can only be used for your most recently deceased spouse. If you remarry, you must use the first spouse’s DSUE before your new spouse dies—otherwise, the unused amount is lost.
You work every day to build a wonderful life for yourself and your family. We are here to help design a unique plan to ensure that you, your spouse, and your family will be taken care of now and upon your passing. With the new federal exemption levels now in place, this is the perfect time to revisit your estate plan and make sure it’s still working as intended.
📞 Call us today to schedule an appointment and explore how we can help protect your spouse and your legacy.
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