Marital trust vs. family trust: Understanding the key differences

Many people protect their assets, practice tax efficiency and share what they have with others using trusts. A trust is a legal entity, managed by a trustee, that holds property for the benefit of people or organizations you care about.

Specialty trusts, such as marital and family trusts, help you clearly define how assets are protected, managed and ultimately passed on to loved ones. Both types of trusts allow you to safeguard your money and provide for your loved ones, but they serve different purposes.

This article explains the differences between marital and family trusts, how each one works, their tax implications and the situations where they’re typically most effective.

A marital trust is designed to provide financial security and defer estate taxes for the surviving spouse. By leveraging the unlimited marital deduction, these trusts allow spouses to transfer assets freely between each other without incurring estate or gift tax liability. This structure helps reduce estate tax exposure, allowing more of your wealth to pass to heirs, beneficiaries and charitable causes.

A couple establishes a marital trust when both spouses are still living. When the first spouse dies, his or her assets—such as investments, real estate and business interests—are transferred into the trust. A trustee, which can be an individual, professional or financial firm, then becomes responsible for those assets, including handling record-keeping and management on behalf of the spouse as the beneficiary. 

The surviving spouse will begin receiving income from trust assets and may access principal under certain conditions. When the surviving spouse dies, any remaining assets in the trust are distributed to other named beneficiaries, such as children or a charitable cause. At that time, any estate tax liability will be due.

Because marital trusts preserve assets for children and other beneficiaries, they’re often used in blended families where estate planning goals may be more complex.

Most trusts include the option to be structured as revocable or irrevocable. A revocable trust can be changed or canceled after it is set up while an irrevocable trust is essentially permanent. Both have advantages and disadvantages. 

During both spouses’ lifetimes, a marital trust can be revocable if established as part of a revocable living trust. However, it becomes irrevocable after the first spouse’s death—once the first spouse dies, the terms of the trust can no longer be changed. This irrevocable feature can help protect assets intended for the next generation from creditors. Also, if the surviving spouse remarries, assets from the original relationship still will pass down in accordance with prior wishes.

A family trust is an estate planning tool designed to preserve multigenerational wealth for children and other beneficiaries while minimizing future estate taxes. By using the deceased spouse’s federal estate tax exemption, it effectively bypasses taxation at the second spouse’s death, ensuring more of your assets remain in the family. In addition to reducing taxes, a family trust protects property from creditors and secures it for future generations, giving you confidence that your legacy will be carried forward with intention and care.

With a family trust, assets are placed in the trust upon the death of the first spouse. The surviving spouse may receive income or limited access to principal, but the trust is structured with the next generation in mind. By using the deceased spouse’s federal estate tax exemption, the trust helps reduce or even eliminate estate taxes when the second spouse dies. This maximizes the total amount of family wealth that can be transferred to heirs. 

Family trusts can be either revocable or irrevocable during their lifetime. A revocable trust provides flexibility in case your family situation or desires change regarding how to distribute assets, while an irrevocable trust ensures your wishes will be carried out after death. 

Although marital and family trusts share some similarities, they differ in purpose, tax treatment and how control and access are structured over time.

At-a-glance comparison of marital and family trusts

Choosing between a marital trust and a family trust depends largely on your circumstances. Here are the key distinctions to help you decide:

A marital trust may be best for couples who want to ensure the surviving spouse’s comfort and financial control. Consider a couple, Kevin and Maria, who remarry later in life. Maria has two adult children. Through a marital trust, Kevin can continue to live in their shared home after Maria's death and draw income from their joint investments. After Kevin dies, the remaining estate assets will be distributed to Maria’s biological children in accordance with the trust. 

For families focused on preserving generational wealth and minimizing estate taxes, a family trust may be the best choice. For example: Michael and Julie are a wealthy couple with a large estate. The couple establishes a family trust to pass down their assets to their children and grandchildren according to their wishes. When Julie dies five years after Michael, her estate bypasses the lengthy probate process. Julie’s assets are distributed to her children in accordance with her and Michael’s wishes, with the remaining assets held by a trustee for her minor grandchildren until they turn 25. 

Some estate plans use both a marital trust and a family trust to support their goals. This arrangement is known as an A/B trust setup. To form the trust, each spouse places assets and then names a final beneficiary, who can be anyone who isn’t the other spouse. The trust splits into parts when the first spouse dies: Trust A (the marital trust) holds assets for the benefit of the survivor, and trust B (the family trust) holds the deceased spouse’s half of the trust property. 

Choosing a trust as part of your estate plan is both a financial and personal decision that reflects your values and how you want to support loved ones across generations. A local Thrivent financial advisor can help you decide whether a trust fits your goals and tailor a strategy for your specific family needs, tax situation and state law.