When one spouse dies, a joint revocable trust is no longer fully revocable. The deceased spouse’s share locks into place and becomes irrevocable, while the surviving spouse keeps control over their own portion and typically becomes the sole trustee. From that point, the survivor has a short list of time-sensitive tasks: valuing assets as of the date of death, splitting the trust into its sub-trusts if the document calls for it, retitling property, notifying beneficiaries, and deciding how to handle the federal estate tax return within nine months.
What Becomes Irrevocable and What Stays Revocable
While both spouses were alive, either one could rewrite the trust, pull assets out, or dissolve it entirely. That flexibility ends for the deceased spouse’s share the moment they die. No one can change the terms the deceased spouse put in place. The surviving spouse’s share usually remains revocable, so the survivor can still adjust their own portion as circumstances change.
This split in status drives everything that follows. The surviving spouse now manages two pools of assets under two different sets of rules: one flexible, one fixed. Treating the irrevocable assets as freely available is where most post-death trust administration problems start.
The A-B Trust Split
Many joint revocable trusts are drafted to divide into two sub-trusts after the first spouse dies. This structure, commonly called an A-B split, separates the couple’s assets for tax and inheritance purposes.
- Trust A (Survivor’s Trust): Funded with the surviving spouse’s share of the couple’s property. This sub-trust stays fully revocable. The surviving spouse can amend its terms, change beneficiaries, withdraw assets, or dissolve it entirely.
- Trust B (Bypass Trust or Credit Shelter Trust): Holds the deceased spouse’s share, up to the federal estate tax exemption amount, which is $15,000,000 in 2026. This sub-trust becomes irrevocable upon creation. Its assets will ultimately pass to the beneficiaries the deceased spouse named, not to the survivor’s estate.1Internal Revenue Service. What’s New – Estate and Gift Tax
Some trusts add a third sub-trust, often called a QTIP or marital trust, to hold assets above the exemption amount while still qualifying for the unlimited marital deduction. Whether your trust uses a two-trust or three-trust structure depends entirely on how the document was drafted. Read the trust before you do anything else; the document controls.
Not every joint revocable trust requires a split. If the document doesn’t call for sub-trusts, the surviving spouse may simply continue administering a single trust with the deceased spouse’s portion now locked. A disclaimer (discussed below) can also route assets into a bypass structure when the trust itself doesn’t do so automatically.
What the Surviving Spouse Has to Do
The surviving spouse typically becomes the sole trustee and faces several tasks that can’t wait. Skipping or delaying any of these can create legal exposure, tax problems, or title complications later.
- Notify government agencies and financial institutions. Report the death to the Social Security Administration (a funeral director often handles this), banks, brokerage firms, insurance companies, and credit bureaus. Most agencies require a certified copy of the death certificate.2USAGov. Agencies to Notify When Someone Dies
- Get an EIN for the irrevocable trust. While both spouses were alive, the joint trust likely used Social Security numbers for tax reporting. The irrevocable sub-trust is now a separate tax entity and needs its own Employer Identification Number. Apply using IRS Form SS-4, which can be done online.3Internal Revenue Service. Information for Executors
- Inventory and appraise every trust asset. Each asset needs a fair market value as of the date of death. Hire a professional appraiser for real estate, closely held business interests, and collectibles. Brokerage and bank statements can document financial account values. These valuations establish the new tax basis for inherited assets and determine how the sub-trusts get funded.
- Retitle assets into the correct sub-trusts. Assets cannot sit in the old joint trust indefinitely. Real estate must be retitled through a deed recorded with the county, often preceded by an affidavit of death of trustee that establishes the surviving spouse as the sole acting trustee. Financial accounts need to be re-registered in the name of the appropriate sub-trust.
- Notify beneficiaries. Many states require the trustee to send a formal written notice to all beneficiaries and heirs of the deceased spouse once a trust becomes irrevocable. This notice typically starts a shortened statute of limitations for anyone who might want to contest the trust, so sending it promptly protects the trustee. Check your state’s probate code for the specific deadline and required content.
Step-Up in Basis
One of the most significant tax benefits triggered by a spouse’s death is the step-up in basis. When someone dies, the tax basis of their assets resets to fair market value on the date of death rather than what they originally paid.4Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent If a couple bought stock for $50,000 and it was worth $300,000 when one spouse died, the deceased spouse’s share gets a new basis at the higher value. Selling that share afterward would generate little or no capital gains tax.
In community property states, the benefit is stronger. Federal tax law treats both halves of a community property asset as having been acquired from the decedent, so both the deceased spouse’s share and the surviving spouse’s share receive a full step-up to fair market value.4Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent In the example above, the entire $300,000 position would receive a stepped-up basis, eliminating all $250,000 of unrealized gain. In separate property states, only the deceased spouse’s half receives the step-up. Getting the date-of-death valuations right matters because those numbers become the permanent tax record for every asset in the trust.
The Nine-Month Deadline and the Portability Election
The federal estate tax return, Form 706, is due within nine months of the date of death.5Office of the Law Revision Counsel. 26 USC 6075 – Time for Filing Estate and Gift Tax Returns Estates below the $15,000,000 filing threshold are not legally required to file, but doing so is often worth it because it’s the only way to make the portability election.1Internal Revenue Service. What’s New – Estate and Gift Tax
Portability lets the surviving spouse inherit any portion of the deceased spouse’s $15,000,000 estate tax exemption that wasn’t used. If the first spouse’s estate was $3,000,000, the surviving spouse can add the remaining $12,000,000 to their own exemption, sheltering up to $27,000,000 from estate tax when they eventually die. The election is made simply by completing and timely filing Form 706.6Internal Revenue Service. Form 706 (Rev. August 2025) – United States Estate (and Generation-Skipping Transfer) Tax Return
If you miss the nine-month deadline and the estate wasn’t otherwise required to file, Rev. Proc. 2022-32 provides a safety net: you can file a late return to elect portability as long as you do so within five years of the date of death. The return must include a statement at the top that it is filed pursuant to that revenue procedure. Waiting carries risk, though. If the surviving spouse dies during that five-year window without the election on file, the unused exemption is gone permanently.
Ongoing Income Tax Filings for the Irrevocable Trust
Once the bypass trust has its own EIN, it becomes a separate taxpayer. Any trust that earns $600 or more in gross income during a tax year must file Form 1041, the income tax return for estates and trusts.7Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 This is an annual obligation that continues for as long as the irrevocable trust exists and produces income.
Tax rates for trusts are compressed compared to individual rates, so the trust hits the top federal bracket much faster. For 2026, a trust reaches the 37% rate on income above $16,000, while an individual filer wouldn’t hit that bracket until well over $600,000 in income. Income the trustee distributes to beneficiaries is generally taxed on the beneficiary’s personal return instead of the trust’s return, which almost always produces a lower overall tax bill. Keeping income trapped inside the trust is one of the most expensive mistakes in trust administration.
What the Surviving Spouse Can and Can’t Do
The surviving spouse’s authority looks completely different depending on which sub-trust you’re asking about.
The Survivor’s Trust
The surviving spouse has unrestricted control over Trust A. They can rewrite the terms, change beneficiaries, sell assets, spend the money, or collapse the trust entirely. For practical purposes it functions like any personal revocable trust.
The Bypass Trust
Access to the irrevocable bypass trust is deliberately limited. Most trust documents allow the surviving spouse to receive all income the trust’s assets generate, such as dividends, interest, and rents. Access to the principal is typically restricted to an ascertainable standard tied to health, education, support, and maintenance. Federal tax law treats a power limited to that standard as something less than full ownership, which is what keeps the bypass trust assets out of the surviving spouse’s taxable estate.8Office of the Law Revision Counsel. 26 U.S. Code 2041 – Powers of Appointment
Many trust documents also give the surviving spouse a limited power of appointment over the bypass trust, exercisable at death. This lets the survivor redirect how the trust assets get distributed among the deceased spouse’s chosen class of beneficiaries, usually descendants. If one child develops a serious medical condition and another becomes financially successful, for example, the surviving spouse can adjust the shares. The power is “limited” because it cannot be used in favor of the surviving spouse, their estate, or their creditors, which preserves the tax benefits of the bypass trust structure.
Disclaimers: The Nine-Month Escape Hatch
A surviving spouse does not have to accept everything the trust leaves them. By filing a qualified disclaimer, they can refuse some or all of an interest in property, and the refused assets pass as though they were never transferred to the surviving spouse in the first place.9Office of the Law Revision Counsel. 26 USC 2518 – Disclaimers This can be a powerful tool when the trust doesn’t include an automatic A-B split but the surviving spouse wants assets to flow into a bypass trust or directly to children.
To qualify, the disclaimer must be in writing, delivered within nine months of the date of death, and the surviving spouse must not have already accepted the property or any of its benefits.10eCFR. 26 CFR 25.2518-2 – Requirements for a Qualified Disclaimer The disclaimed property must pass without the surviving spouse directing where it goes. Because the nine-month window is absolute, this decision needs to happen early, ideally with an estate planning attorney who can model the tax consequences of accepting versus disclaiming.