Considering a Family Trust When Married

Legal Guide | By

Rachael Pace, Author

Rachael Pace

Expertise: Mental health, Parenting

Rachael Pace inspires with motivational articles on loving partnerships. She encourages making room for love and facing challenges together.

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Updated: 16 Mar, 2026

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Talk openly about your shared values to align goals and deepen trust, then commit to listening with curiosity and supporting each other's needs.
Plan together how you’d share decisions and who handles what, then agree on clear roles with mutual respect to avoid miscommunication and grow closer.
Seek trusted advice from a professional and revisit your plan as life changes, showing you value each other’s security and ongoing connection.

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When you get married and are looking to protect your assets for your family, forming some types of trusts can protect the ownership of your assets while you are alive. In general, you will transfer the legal ownership of assets you are wanting to protect to the trust…while having the ability to continue to use and enjoy them.

A popular trust for protecting your assets during a marriage is the family trust. So how do you know if a family trust is right for you?

Are you looking to gain some benefit from no longer owning assets?
Are you looking to be able to protect certain assets from claims and creditors?
Are you looking to set aside money for important or special events such as your children’s education?
Do you want to ensure that your designated distributions to your spouse and children are protected?
Do you want to be able to avoid claims against your estate when you die?
Are you willing to accept costs and complexity associated with managing the trust?
Do you know someone that you trust implicitly to act as the trustee of your trust?

If you answered yes to any or all of the above, the family trust may be for you.

Thoughts to consider when considering a family trust

Family trusts are complex and require commitment to the administration and management of the trust. As with other trusts, if it isn’t managed correctly, not only can it result in increased costs and time, but it can also result in the trust being declared a “sham”, thus potentially eliminating the protection of the assets in the trust.

It is important to understand that when you place assets into the trust, they are no longer yours and you relinquish control of them. When assets are placed in the trust, the ownership of those assets is passed to the appointed trustees who are required to act as defined in the terms of the trust deed in the best interests of the beneficiaries of the trust. Unfortunately, a trustee’s decision may not always align with the intent of the individual who created the trust. Even worse, if the trustee is a family member, these differences can result in volatile emotions and even lawsuits.

If you are still on board with creating a family trust, it is important to know the different parties that are involved in the process. These include:

Settlor (if you are creating the trust…it is you; otherwise, it is the person or company who creates the trust).
Trustee (this is the person, or people, who are appointed to manage the trust; appointing a lawyer or accountant can be a good idea when it comes to trustees).
Beneficiary (these are the people who will benefit from the trust).

It’s also important to have a good understanding of what is involved when creating the trust. Some general considerations include:

You will need to make a decision about your assets that you want to place in the trust. This will also require identifying the value of each of those assets. Many times, family trusts will include homes, cash, shares, and other items of value.
When the ownership of the assets is transferred to the trust, the trust then owes a debt back to the settlor. This is where gifting comes in.
A trust deed will be drafted to formally set up the trust. This will address such things as appointing trustees, identifying beneficiaries, and establishing the rules for the administration and management of the trust.

Family trust asset transfers and gifting

There are two very important factors to understand when it comes to a family trust…transferring assets and gifting.

Once you form the trust, your assets can be sold to the trust at market value. The challenge, though, is if the trust has no money to purchase the assets, how does it pay for them. This is where the principle of lending money to the trust comes into play. In essence, think of it as a paper transaction where you sell the assets to the trust and the trust subsequently owes you a debt. It is important to realize, though, that that debt that is owed to you is considered a personal asset until the debt is paid. Since the general intent of placing the assets into the trust are to create protections by eliminating personal ownership, it is important to understand how to eliminate that debt, thus reducing your personal ownership. This is where gifting comes in.

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Gifting is a method of shifting away the debt that the trust owes them as well as providing opportunities to reduce estate taxes. Think of it as your wealth transfer strategy.

The gifting process is subject to federally established annual maximums before triggering a gift tax. For 2015, gifts up to $14,000 could be provided to any number of people in a single year without triggering the tax. This increases to $28,000 for spouse splitting gifts. Additionally, there is the added benefits of having the ability to make unlimited payments directly to educational institutions and medical providers on behalf of others if they are qualified expenses without triggering the tax. There is also a lifetime aggregate exemption before any out-of-pocket gift taxes are triggered. This means that during your lifetime you can give away a federally establish maximum (currently $5.43 million) over and above the annual gift exclusion ($14,000) and payments made for qualified expenses (educational institutions and medical providers).

Due to the highly complex nature of trusts, assets transfers and gifting, it is strongly recommended that you seek out the experience of a qualified estate planning attorney when it comes to forming your trust.

Asset protection trusts

When you get married, you want the best for your family…this includes after you die. The right and properly formed and managed trust can often be the mechanism to ensure that your assets are protected, thus ensuring that your family’s future is protected.

The idea of asset-protection trusts is one that covers many legal structures, including any type of trust that provides for funds to be held and maintained on a discretionary basis. It is often used for such things as:

Protecting assets from creditors
Reducing or eliminating taxation
Protections from a divorce
Protections in the event of a bankruptcy

Think of these trusts as the ability to potentially protect your assets from creditors due to lawsuits, owed debts, and other actions that your personal assets would generally be subject to seizure.

There are two primary types of asset protection trusts…third party trusts and self-settled trusts. Third party trusts are set up by one party for the benefit of another. Self-settled trusts are set up by one party for their own benefit.

There are also several types of third party asset protection trusts designed to benefit different family situations such as those established for minors, surviving spouses, adult, and disabled beneficiaries.

Setting up a Trust

So you have made the decision to set up a trust on your own. Now it’s time to make sure that you ask the right questions to be sure your trust is valid, is consistent with your state’s laws, and accomplishes what you intend it to do.

What do you want the trust to do? Trusts can be excellent tool for protecting assets, property, and wealth as well as being the mechanism for ensuring your estate is protected and passed on to your beneficiaries. It can also be a tool that provides reduced tax liability, distributes assets to your favorite charity, or simply just a way to keep your assets in the family for generations to come.

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How much control do you want to have when it comes to assets in the trust and managing the trust? With certain levels of protection comes different levels of control or authority. Trusts are either revocable or irrevocable. If you are seeking a higher degree of protection, an irrevocable trust may be the best path (although the assets are no longer yours). On the other hand, revocable trusts allow placing assets into the trust with the ability to transfer the assets in the future or terminate the trust altogether (and not affording the same level of protection as an irrevocable trust).

Who do you want the beneficiaries of your assets to be? It is common for a spouse and children to be names as beneficiaries. That said, maybe you want it to be your grandchildren, charity or lifelong friend.

Some other questions that may be good to consider include:

How important is avoiding probate to you?
Do you want the personal assets to be private?
Is there a need to segregate assets that you and your spouse brought into the marriage?
Does your estate exceed the combined estate tax exclusion, thus possibly requiring a method to reduce estate taxes?
Who are you planning to distribute and manager the trust assets (your trustee) and who is your backup if they are unable?
What assets do you intend to transfer into the trust?

Now that you have your answers, which trust is best for you? There are many types of trusts, each usually tied to specific outcomes. For instance:

Living trusts are generally used to pass your assets to beneficiaries without having to go through probate.
Charitable remainder trusts are generally used to donate assets to a charity after your death.
Life insurance trusts are good for high-net worth people who want the trust to be the beneficiary of their life insurance and their heirs the beneficiaries of the trust.
Bypass trusts are generally used to help married couples avoid costly estate taxes (this is also commonly known as a marital or family trust).
Spendthrift trusts are generally used when you want to be sure that money left to a beneficiary isn’t blown quickly, thus providing options such as distributing the money over time as an allowance.
QTIP trusts are generally used to ensure that when you die, if your spouse remarries and also dies, their new spouse doesn’t get your assets. By leaving the assets to the trust, it can provide income to your spouse, but when they die, the assets would be protected for your children.

Once you have decided the type of trust you are going to establish, you will need to examine the steps and laws that are required for establishing that trust.

For instance, establishing a living trust can generally be simple, requiring a written agreement or declaration that appoints a trustee to manage and administer the assets of the grantor (you). Of course, you will want to be sure to examine your state’s laws to ensure all points and verbiage are covered.

The bottom line is that you will have to determine which trust is the best strategy for you. What works for one person may not be right for you. Although there is no one-size-fits-all perfect solution to every situation, by taking time to identify your personal financial objectives and values, you improve the chances of establishing the right trust.

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Rachael Pace Author

Rachael Pace is a noted relationship writer associated with Marriage.com. She provides inspiration, support, and empowerment in the form of motivational articles and essays. Rachael enjoys studying the evolution of loving partnerships... Read more and is passionate about writing on them. She believes that everyone should make room for love in their lives and encourages couples to work on overcoming their challenges together. Read less