^Blog Securing Wealth for Your Spouse and Children in a Blended Family

Estate planning is a crucial component of wealth management, particularly for individuals in blended families, where one or both spouses have children from previous relationships. Traditional estate planning methods, such as leaving assets outright to a surviving spouse, can create unintended consequences. A spousal trust is an advanced estate planning tool that ensures your surviving spouse is financially secure while protecting the inheritance for your intended beneficiaries.

What Is a Spousal Trust and How Does It Work?

A spousal trust is a legally binding provision in a will or testamentary trust that holds assets in trust for the surviving spouse. Unlike a direct inheritance, where assets transfer outright, a spousal trust allows the surviving spouse to benefit from the assets during their lifetime without gaining absolute control over their final distribution. Upon the spouse’s passing, the remaining trust assets are distributed to predetermined residual beneficiaries, typically the deceased’s children.

Without a spousal trust, assets left to a surviving spouse could be subject to their own estate plan, potentially redirecting wealth to their children from a prior relationship rather than the intended beneficiaries. This risk is particularly concerning in blended families, where financial legacies may become unintentionally altered. By using a testamentary spousal trust, the original asset owner retains control over how their wealth is ultimately distributed, reducing the risk of estate litigation and ensuring assets remain within the
intended bloodline.

What Assets Can Be Held in a Spousal Trust?

A spousal trust can hold various estate assets that do not have direct beneficiary designations, including:

• Real estate holdings (primary residence, rental properties, vacation homes)
• Non-registered investment accounts (stocks, bonds, mutual funds)
• Corporate shares (private business interests, holding companies)
• Bank accounts and personal assets (cash reserves, valuable collectibles)

Assets such as RRSPs, RRIFs, and life insurance policies generally bypass the estate when designated to a beneficiary, but non-registered investments and personal property can be structured within the trust for optimal tax and succession planning. Additionally, the trust terms can specify whether the surviving spouse has access to only the income generated by the trust or whether they can also access the capital, ensuring further control over wealth distribution.

At Three60 Wealth, we specialize in advanced estate planning strategies to help families navigate the complexities of wealth transfer and preservation. If you want to ensure your estate is protected and distributed according to your wishes, contact us today.

Visit Three60wealth.ca to learn more.

Authored by: Jason Nagel, CFP