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Your Spouse

Many accounts have special provisions for spouses; you should understand what tools are at your disposal to leave assets to your spouse as simply and cost-effectively as possible.

As a married couple, you will probably want to plan your estate together. While you can plan together, you should also consider how your assets are owned (jointly or individually), since it’s usually difficult to predict who will pass away first.

If one spouse typically handles most or all of the family’s financial affairs, and the other spouse is less financially involved, it’s wise to put plans in place to ensure the latter would have the help needed to continue on a good path financially.

As always, ensure your beneficiaries are up to date on the assets that have provisions for naming them, including investment and bank accounts with transfer on death (TOD) designations.

Joint ownership

You may have assets that are held with joint ownership with rights of survivorship such as real estate, annuities, and bank accounts. For these types of assets, the ownership will pass to the surviving spouse directly upon the death of the first, often avoiding probate.

If, for example, your spouse is not currently a joint owner of the home you own, but you want your spouse to inherit the home fully without it going through probate, updating the ownership may be a simple, inexpensive way to accomplish this.

Trusts

Trusts with distinct benefits for spouses

Credit shelter trusts allow assets to be available for the surviving spouse’s needs, typically once he or she spends down his or her own assets. The deceased can have in place the ultimate beneficiaries to receive the assets upon the death of the surviving spouse and these assets typically pass free of additional estate taxes.

Qualified domestic trusts (QDOTs) enable transfers at death to non-citizen spouses to qualify for the unlimited marital deduction available to U.S.-citizen spouses.

Qualified terminable interest property trusts (QTIPs) may be established to provide lifetime income to a spouse and then have the remainder transferred to another beneficiary after the spouse’s death.

A trust can be an effective tool for transferring assets to a spouse while reducing estate taxes and maintaining control over the assets even after you have passed away. A simple revocable trust or irrevocable trust may suit your needs, or you may want to consider one of the three trusts with distinct benefits for spouses, listed at the right.

Retirement plans

Depending on the size of your account balance, designating your spouse as beneficiary may have advantages and disadvantages. To learn about the options your spouse will have when inheriting an IRA, see If you are the surviving spouse of an IRA owner in Fidelity Viewpoints®.

The rules for 401(k)s and other qualified retirement plans may be different from those for IRAs, including special provisions for spouses. For example, if you are married and you want to designate beneficiaries other than your spouse, you may need written consent from your spouse.

Otherwise, retirement plans follow roughly the same guidelines for what is taxable, but other features will vary from plan to plan. Contact the plan’s administrator for specific rules governing your plan.

Spouses from previous marriages

If you have had a previous marriage, you’ll want to make sure all of your ownership documents and beneficiaries are up to date. You will also have to comply with any divorce settlement arrangements.

Next step

Estate planning strategies by asset
Once you have considered your options for each beneficiary, learn about your options for different types of assets.

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transfer on death (TOD)

a provision of a brokerage account that allows the account’s assets to pass directly to an intended beneficiary; the equivalent of a beneficiary designation

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joint ownership with right of survivorship

ownership arrangement in which two or more individuals own the whole of an asset equally; when one owner passes away, assets pass to the other joint owner(s)

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revocable trust

trust that gives one the ability to pass trust assets to beneficiaries without the delay or expense of probate, but over which the ability to change or terminate during one's lifetime is retained (also known as living trust)

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irrevocable trust

trust that cannot be changed once it is created (during the grantor's lifetime or at his or her death)

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credit shelter trust

trust established to bypass the surviving spouse's estate in order to make full use of each spouse's federal estate tax exemption (also known as family trust, bypass trust, or B trust)

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qualified domestic trust (QDOT)

trust structured to allow the surviving spouse of a non-U.S. citizen to benefit from the marital estate tax exclusion in the deceased spouse's estate

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qualified terminable interest property (QTIP) trust

trust designed to provide lifetime income to a surviving spouse while transferring the remainder interest to beneficiaries of the grantor's choosing, often used for children from previous marriages; assets in the trust will be included in the surviving spouse’s estate at death

Questions?

The tax information and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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