What is a marital deduction trust?
A marital deduction trust is an estate planning tool used in Hawaii that can reduce or even eliminate estate taxes for a married couple by allowing assets to be passed to the surviving spouse without triggering an estate tax. This type of trust is designed to provide for the security of the surviving spouse’s financial future without having to pay estate tax on the assets that would normally be due if the assets were transferred directly through a will. With a marital deduction trust, the first spouse to die transfers (either during life or at death) assets to the trust, and the trust is designed so that the surviving spouse can continue to receive income benefits from the trust without ever having a legal interest in the trust assets. This allows the surviving spouse to manage the assets in the trust for the benefit of any heirs or beneficiaries. Because the assets in the trust are not considered to be a part of the estate of the surviving spouse, they are not subject to an estate tax. Marital deduction trusts can be useful for couples with considerable assets, as they can allow for the protection of the assets, while still allowing the surviving spouse to benefit from them. Although there are some restrictions and requirements when setting up the trust, it can be an effective way to pass assets on to the surviving spouse without triggering estate taxes.
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