My husband passed away last year. We had a trust done eleven years ago. I really never understood the details. Now I want to refinance my house and the bank is telling me that they cannot complete this because I didn’t take certain action to divide the trust after my husband’s death.
-Grumpy on Grenadier
Dear Grumpy on Grenadier:
I have met with a number of surviving spouses who have what is commonly referred to as an A/B Trust. This type of Trust literally requires the Surviving Spouse to create a separate, irrevocable trust after the death of a spouse.
Many people signed these trusts years ago as a strategy to save money on death taxes. However, the laws recently changed and death taxes are not a concern for those with less than $5 to $10 million dollars.
Unfortunately, people forget to update their estate planning. Then everything unravels at the death of the first spouse. It is at that point that the widow(er) realizes that they are stuck with a trust that is partially irrevocable, more expensive to administer and must be maintained every year with a new tax return. Banks and other financial institutions will often not work with you until these required tasks are first done.
It is critical that married couples review their older estate planning documents before the death or incapacity of a spouse.