How is a premarital trust different from a prenuptial agreement?

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When would I need a Premarital Trust?

If you are older, perhaps a widow or widower with children, and contemplate to remarry, you may worry: What if I die, what happens to the money I brought into the marriage if my surviving spouse remarries? Or if we get a divorce? Typically, a prenuptial (premarital) agreement would be the usual solution. What if you don’t want to bring this delicate topic up with your new partner? Or, what if he or she says no?
This is where a premarital trust may be an alternative solution. Technically, a premarital trust may not be strictly needed as all premarital property is separate property under California Family Law. However, you would need to keep good records and avoid commingling. A premarital prevents commingling and makes your intentions very clear should they ever be challenged.

How does a premarital trust work?

The person with the assets to be protected can establish an inter vivos trust and transfer into it all of the property that they do not want to be subject to any divorce or inheritance rights of a new spouse. The asset holder can act as a trustee for themselves and their children. An independent professional trustee would then typically be appointed to succeed the asset holder on their death, disability, or resignation. Alternatively an independent trustee can act as trustee from the beginning and the asset holder can reserve the right to change trustees. The trust can be revocable during the asset holder’s lifetime and become irrevocable only on the asset holder’s death. Sometimes the surviving spouse claims that the trust was established to fraudulently bypass his or her legal rights. This claim usually fails provided that the trust was established and funded well before marriage.

See also:
Who should be trustee?
Trusts – A general overview

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