Episode 77: How to Take Your Estate Plan Off Script
Episode 77
Host: Jill Mastroianni
How to Take Your Estate Plan Off Script
You can follow all the estate planning rules and still end up with the wrong plan. In this episode, Jill walks through a question from a young attorney who’s been handed traditional estate planning forms and is wondering whether they actually serve her clients. Jill break down how a standard trust structure can limit flexibility for families who don’t need estate tax planning, and how small adjustments can make a big difference. Estate planning isn’t about checking boxes. It’s about building something that works.
What You’ll Learn in This Episode
What a traditional Family Trust / Marital Trust estate planning structure is and why it’s so commonly used
Why many families today don’t need estate tax planning, even though their documents assume they do
The tradeoff between tax planning and flexibility for a surviving spouse
A simple rule: the more control you have over an asset, the more likely it is to be included in your taxable estate
Why an estate plan can technically “work” and still miss your actual goals
How directing assets to a Marital Trust can provide more flexibility in certain situations
What a Disclaimer Trust is and how it can build in estate planning flexibility for future law changes
Why estate planning should account for human behavior, not just legal theory
The best estate plans are designed to adapt over time, not just work on day one
Resources & Links
Watch this episode on YouTube: https://youtu.be/Ad7ZkN6sX6I
Estate Plan Audit: https://www.deathreadiness.com/audit
Episode 19: Why You Need (or Don’t Need) a Trust: https://www.deathreadiness.com/podcast/episode-19-how-to-know-if-you-need-a-trust
Episode 38: Why You Need (or Don’t Need) a Will: https://www.deathreadiness.com/podcast/why-you-need-or-dont-need-a-will
Connect with Jill:
Website: DeathReadiness.com
Email: jill@deathreadiness.com
Learn more about Jill’s solutions
Subscribe to the Death Readiness Dispatch!
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You can follow all the rules and still end up with the wrong plan. In today’s episode, a young attorney questions whether a traditional trust structure serves her actual clients or just follows outdated assumptions. I break down how a plan that checks every box can still miss what matters most. If you’ve ever wondered whether your plan truly fits your life, this one’s for you.
Welcome to The Death Readiness Podcast. This is not your dad’s estate planning podcast. I’m Jill Mastroianni — estate planning attorney, death readiness guide, and your translator for wills, trusts, probate, and the conversations most families avoid. If you’ve been wondering things like, ‘Can a trust protect what I leave to my children?’ ‘What happens if I give someone power of attorney over me?’ and ‘How can I help my parents while respecting their independence?’ You’re in the right place.
My husband and I both work from home, and Friday was trash day. When I came back from walking the dogs, I noticed our neighbors a couple of doors down had put a dresser out at the curb. And, aside from cracks in the top, it was in good condition.
We were actually in the market for a dresser. When we moved into our house in October, we couldn’t get our old one around a sharp corner and up the stairs to our bedroom… so that dresser now lives in my office.
I went inside and asked my husband if he could help me bring this one in.
We got it upstairs, and then we start laughing… because it’s a Fisher-Price dresser. The little girl down the road had outgrown it, and here we were bringing it into our adult bedroom.
But as a family, we try to be intentional about not always buying things new. It wasn’t a need, we just figured we’d find something used eventually.
So we cleaned it up, and my husband spent about $80 putting a new top on it.
And I think it looks beautiful. Better than what I had pictured for our bedroom. Now, I’ll be the first to admit I don’t exactly have an eye for interior design, but I think it looks fantastic.
So what did we do?
We took the structure of something that worked really well for one situation, a little girl’s bedroom, and adapted it to work for a completely different one, our mid-life bedroom.
And that’s what today’s episode is about.
How do you take a structure that made sense at one point in time and adjust it to fit different goals, different people, and changing circumstances?
Today’s question comes from a young attorney named Abby and I was really excited to see this come in, because she’s the first attorney who’s written to me with a Tuesday Triage question.
Abby is fresh out of law school and working at an established general practice firm in a small town in Michigan. She’s been given a stack of estate planning forms to work from and she’s wondering whether those forms should be updated, specifically, the provisions that control what happens after the death of the first spouse in a married couple.
Abby and I are kindred spirits here because she’s talking about forms, and I love forms.
One of my jobs during law school was updating a firm’s will forms. And what I didn’t appreciate before that experience is just how many variations there are. Forms for single individuals, married couples, unmarried partners, with kids and without kids, taxable and non-taxable estates, blended and non-blended families, charitable and not charitably inclined, those with family businesses and those without, and the list really does go on and on.
Abby’s question is really about one specific structure her firm uses for married couples.
She says they use a mandatory marital and family trust structure, which is a very traditional estate planning approach.
Here’s how it works:
At the first spouse’s death, that spouse’s property, whether it’s probate property or property held in a revocable trust, is split into two buckets – the marital trust bucket and the family trust bucket.
And, if you’re newer here and want a deeper dive on probate or revocable trusts, I’ll link to a couple of helpful episodes in the show notes.
But for today, just know this: we’re talking about the category of assets that Abby’s estate plan actually controls.
We’re talking about buckets of property.
A portion of the property goes into the first bucket, a Family Trust, up to the amount of the federal estate tax exemption. Anything above that amount goes into a second bucket, a Marital Trust.
Right now, the federal estate tax exemption is $15 million per person. Michigan, where Abby practices, doesn’t have a state estate tax, and most states don’t, so in most cases, we’re really just looking at the federal estate tax.
If you’re listening to this and thinking, I have a plan… but I’m not actually sure how it works, you’re not alone. That’s exactly why I offer a 1-hour Estate Plan Audit. We walk through your documents together so you understand what they actually do, and just as importantly, whether they match your goals. You can learn more at deathreadiness.com/audit. That’s deathreadiness.com/audit.
Okay, let’s get back to Abby’s question. And, to make this all make sense, let’s take a look at a fictitious scenario:
Let’s say Abby is working with a couple, Joe and Jane, with a $2 million estate. For simplicity, we’ll assume they each own $1 million individually, they don’t own assets jointly, and there are no beneficiary designations directing those assets elsewhere.
Joe and Jane have three goals:
#1. Avoid probate
#2. Avoid estate taxes, and
#3. Give the surviving spouse as much flexibility as possible after the first one’s death
So let’s walk through what happens if Joe dies first.
Under the structure in Abby’s current forms, Joe’s $1 million goes into the Family Trust, to be administered under its terms.
So what does that actually mean for Jane?
Jane is a beneficiary of the Family Trust but she can’t just do whatever she wants with the money.
Typically, distributions are limited to what’s referred to as Jane’s health, education, maintenance, and support. And if Joe and Jane have children, they may also be beneficiaries, in addition to Jane.
Why is that? Why can’t Jane just have full access?
Because the more control and access Jane has, the more likely it is that those assets will be pulled back into her taxable estate when she dies.
And that defeats the entire purpose of the Family Trust in this scenario, which is to keep those assets out of her taxable estate.
There’s a general rule in estate planning: The more control you have over an asset, the more likely it is to be included in your taxable estate.
Now, there can be other reasons to use a Family Trust, reasons like asset protection and preserving property for children.
But for purposes of this example, let’s assume Joe and Jane don’t care about any of that. They’re only focused on estate taxes.
So here’s the real question:
Do they need a Family Trust when each of their estates is about $14 million below the federal estate tax exemption? When the federal estate tax exemption was lower, using this structure, which required the mandatory funding of the Family Trust, worked for a lot more people.
Is there a change Abby could make to her firm’s form to provide more flexibility for Joe and Jane?
Earlier in the episode, I mentioned that this type of estate plan can be referred to as a marital trust/family trust structure.
So far, I’ve only been talking about the Family Trust. What about the Marital Trust?
Well, in Jane and Joe’s scenario, the Marital Trust wasn’t needed. The Marital Trust bucket was empty.
Why? Because the $1M in Joe’s estate did not exceed the estate tax exemption amount of $15 million.
If Joe, for example, had $16 million in his taxable estate, $15 million would be directed to the Family Trust and the difference between $16 million, the total amount in Joe’s taxable estate, and $15 million, the amount of the estate tax exemption, which is $1 million, would be distributed to the Marital Trust. $1 million would go in the Marital Trust bucket.
For spouses who are United States citizens, and this is important because the same treatment is not available to a non-US citizen spouse, gifts to the surviving spouse get a marital deduction, essentially meaning that the property in the Marital Trust gets treated as being in the Jane’s estate when she dies, rather than Joe’s estate at his death.
The taxes rules around Marital Trusts are a little tricky but for our purposes today, all you need to know is that because the property in a Marital Trust is included in the surviving spouse’s taxable estate, Jane can have as much control and access as she and Joe want her to have.
I want to remind you again about Joe and Jane’s priorities:
#1: Avoid probate,
#2: Avoid estate taxes, and
#3: Give the surviving spouse as much flexibility as possible to do what they want with the remaining property after the first spouse’s death.
Notice that I didn’t say, “avoid creditors, or preserve assets for future generations, or prevent property from going to a future spouse.” Joe and Jane are not worried about those things.
You know what Joe and Jane love about the Marital Trust?
It avoids probate—and it can be drafted to give the surviving spouse as much flexibility as possible.
Now let’s look at what Abby’s current documents actually do.
When Joe dies, his $1 million goes into the Family Trust.
Did Joe’s estate avoid probate? Yes.
Did it avoid estate taxes? Yes.
Does Jane have a lot of flexibility? No.
So how can Abby revise her documents to better match Joe and Jane’s goals?
Instead of requiring the Family Trust to be funded at the first spouse’s death, she could make it optional.
In fact, she could direct all of Joe’s assets to the Marital Trust, the structure that already gives Jane the flexibility she wants.
Now what happens?
Did Joe’s estate avoid probate? Yes.
Did it avoid estate taxes? Yes.
Does Jane have flexibility? Yes.
Same results on the first two goals and a different result on the third.
And, I want to make sure I’m clear on this point:
Joe’s estate didn’t avoid estate taxes because of anything the Marital Trust is doing. It avoided estate taxes because it wasn’t large enough to be taxable in the first place.
Now, Abby is new to estate planning but she understands something really important: human behavior.
Joe and Jane are already ahead of most people just by creating a plan. But Abby isn’t counting on them to come back and update it.
Because even though estate planning shouldn’t be one-and-done, that’s how most people treat it.
So she wants to build documents that are flexible enough to handle change, especially something as unpredictable as the federal estate tax exemption.
When I was born, in 1981, the federal estate tax exemption was $175,000 per person.
Today, it’s $15 million per person.
That’s a massive difference, and at $15 million, very few families need to worry about estate taxes right now.
But the federal estate tax exemption could change.
Why? Because laws change.
That exemption could come down, maybe not all the way back to $175,000, but it doesn’t have to drop that far to start affecting more families.
Now, in my own estate plan, I don’t build in contingency planning for estate taxes. If the law changes, I’ll just update my documents.
But my clients don’t have that same built-in access to an estate planning attorney.
So I prefer to give them documents that can adapt over time, without requiring them to revisit everything right away.
So what could Abby do today to build in that kind of flexibility?
She could allow the Family Trust to function as a Disclaimer Trust so that the funding of it would be optional, rather than mandatory.
And a disclaimer, for estate planning purposes, is just a formal way of saying, “I don’t want this.”
That’s a little different from how we usually use the word “disclaimer.” Outside of estate planning, it often means you’re not taking responsibility for something.
Here, it’s not about responsibility. It’s about refusing to accept an asset so it can pass somewhere else instead.
Here’s how that plays out.
Under the revised plan, when Joe dies, all of his assets go into the Marital Trust, giving Jane maximum flexibility and avoiding probate.
But let’s fast forward 20 years.
What if the estate tax exemption has dropped significantly, let’s say to $500,000 per person?
We’ll keep the same facts: Joe and Jane each still have $1 million.
Under the document Abby drafted, Joe’s entire $1 million goes to the Marital Trust.
But now, Jane might want a different result.
She might want $500,000, the full amount of Joe’s available estate tax exemption, to go into the Family Trust, so it’s included in Joe’s taxable estate at his death and not included in Jane’s taxable estate later.
That’s where the Disclaimer Trust comes in.
To make this work, Jane has to complete what’s called a qualified disclaimer under federal and state law.
At a high level, that means the disclaimer has to be in writing, and it has to be made within nine months of Joe’s death.
Making a qualified disclaimer isn’t complicated, but it is technical. So if this is something you’re considering, it’s important to work with an estate planning attorney to make sure it’s done correctly, especially because states can have their own specific requirements.
Now, let’s go back to something I mentioned earlier.
I said that Joe and Jane each own their assets individually, and there are no beneficiary designations getting in the way of this plan.
But what if that weren’t true?
What if Joe and Jane owned all of their property owned jointly?
In that case, when Joe dies, all of his assets pass automatically to Jane by operation of law. Jane ends up owning everything outright in her individual name.
And Abby’s carefully drafted estate plan?
It doesn’t control those assets at all.
Remember, your estate plan is more than the documents you sign.
If your asset titles and beneficiary designations don’t line up with those documents… the documents don’t do anything.
Abby can draft a thoughtful, flexible plan, but if Joe and Jane don’t give her accurate information about what they own, how they own it, and who they’ve named as beneficiaries, there’s only so much she can do.
So Abby, thank you for the question. It’s a great one, and, it’s something that’s come up in my own practice recently, so the timing couldn’t be better.
Now, let’s circle back to that dresser my husband and I brought in from the curb.
At one point, it worked perfectly for a little girl’s bedroom. It was built for that stage of life, that set of needs.
But instead of throwing it away, we adjusted it. We kept the structure but we made it work for a completely different situation.
That’s what good estate planning should do.
It’s not about using a structure just because it’s always been used. It’s about understanding why that structure exists and then adapting it to fit the people, the goals, and the reality in front of you.
Most families don’t need something complicated. They need something that works, that gives them flexibility, that reflects their actual priorities, and that still makes sense, even as things change over time.
So whether you’re Abby, working through forms, or Joe and Jane, trying to get this right, the goal isn’t to follow a structure just because it’s standard.
It’s to use something that actually works for you.
If you’re thinking, I have a plan somewhere… I just don’t really know what it says, you’re in very good company. That’s exactly why I offer a one-hour Estate Plan Audit. We go through your documents together so you can actually understand them, and see if they still fit your life.
You can learn more at deathreadiness.com/audit. That’s deathreadiness.com/audit
Thanks for listening today.
This is Death Readiness, real, messy and yours to own. I’m Jill Mastroianni and I’m here to help you sort through it, especially when you don’t know where to start.
Hi, I'm April, Jill's daughter. Thanks for listening to The Death Readiness Podcast. While my mom is an attorney, she’s not your attorney. The Death Readiness Podcast is for educational and entertainment purposes only. It does not provide legal advice. For legal guidance tailored to your unique situation, consult with a licensed attorney in your state. To learn more about the services my mom offers, visit DeathReadiness.com.
