When one spouse dies, a living trust stops being a flexible planning document and becomes a set of active instructions. The surviving spouse or named successor trustee takes over management, a handful of tax elections come due on strict deadlines, and the trust’s assets are either held for the survivor’s benefit, split into separate sub-trusts, or distributed to the named beneficiaries. Which of those three happens, and how much control the surviving spouse keeps, depends almost entirely on how the trust was drafted. That is the short version of what happens to a living trust when one spouse dies, and the rest of this article walks through the pieces in the order you will actually encounter them.
The Trust Document Decides Almost Everything
Before anything else, read the trust. The pattern of what happens next is driven by which of three common structures the couple used.
Joint Revocable Trust
This is the most common arrangement for married couples. Both spouses created a single trust, both served as co-trustees, and either could change the terms while both were alive. When one spouse dies, the surviving spouse typically becomes the sole trustee and keeps the same power to amend or revoke the trust. The trust stays fully revocable until the second death, at which point it becomes irrevocable and the successor trustee takes over.
Some joint revocable trusts are drafted differently, so that the deceased spouse’s share becomes irrevocable at the first death even while the survivor’s share stays flexible. The difference between “fully revocable by the survivor” and “survivor’s share only” is large, and the answer is in the document, not in a general rule.
A/B (Bypass) Trust
An A/B trust splits automatically into two trusts at the first death. Trust A (the survivor’s trust) holds the surviving spouse’s assets and remains revocable. Trust B (the bypass or family trust) holds assets up to a specified amount from the deceased spouse’s estate and becomes irrevocable. The surviving spouse cannot change Trust B’s terms and typically has only limited access to its assets, often restricted to distributions for health, education, maintenance, or support. Trust B’s assets eventually pass to named beneficiaries, usually children, without being included in the surviving spouse’s taxable estate.
These structures were designed when the federal estate tax exemption was much lower. With the 2026 exemption now at $15 million per person, many couples no longer need an A/B split for tax reasons. The split still happens automatically if the trust says so. If you inherited a trust with A/B language, talk to an estate attorney before assuming you can ignore it.
QTIP Trust
A Qualified Terminable Interest Property trust pays the surviving spouse all income from the trust, at least annually, but locks the principal for future beneficiaries chosen by the deceased spouse.1eCFR. 26 CFR 20.2056(b)-7 – Election With Respect to Life Estate for Surviving Spouse The surviving spouse cannot redirect the remainder and generally cannot reach the principal unless the trust specifically allows it. QTIP trusts are common in blended families, where each spouse wants to provide for the other while ensuring that children from a prior relationship ultimately inherit. For the trust to qualify for the unlimited marital deduction, the executor must affirmatively elect QTIP treatment on the federal estate tax return. Missing that election can push the tax to the first death rather than deferring it.
What the Surviving Spouse or Trustee Does Right Away
Order certified copies of the death certificate, and order more than you think you need. Banks, insurers, brokerage firms, and the county recorder each want their own certified copy, and reordering later takes time.2USAGov. How to Get a Certified Copy of a Death Certificate
If the deceased spouse received Social Security, report the death to the Social Security Administration. The funeral director can do this if you give them the Social Security number; otherwise, call the SSA at 1-800-772-1213. The SSA does not pay benefits for the month of death, so any payment for that month must be returned. If it came by direct deposit, ask the bank to send it back.3USAGov. Report the Death of a Social Security or Medicare Beneficiary The surviving spouse should also ask about survivor benefits, which can sometimes exceed the survivor’s own retirement benefit.
The successor trustee’s legal duties begin immediately. Most states require the trustee to notify every beneficiary named in the trust within 30 to 60 days of the death. That notice typically explains that the trust has become irrevocable (or partially irrevocable), identifies the new trustee, and gives beneficiaries enough information to understand their rights. Skipping or delaying the notice can expose the trustee to personal liability and, in some states, extend the window during which a beneficiary can challenge the trust.
Secure the trust’s assets. Contact every financial institution where the trust holds accounts, lock down real estate, confirm insurance is in force, and collect recent statements. The trustee should also obtain a new employer identification number for the trust, because a revocable trust that used the grantor’s Social Security number during life needs its own TIN once the grantor dies.4Internal Revenue Service. 2025 Instructions for Form 1041 and Schedules A, B, G, J, and K-1
The Tax Deadlines That Cost Money if Missed
A spouse’s death starts several clocks at once. Three of them matter for most families.
Portability of the Federal Estate Tax Exemption
Most estates will not owe federal estate tax. The One Big Beautiful Bill Act, signed into law on July 4, 2025, set the basic exclusion amount at $15 million per individual for 2026, with inflation adjustments beginning in 2027, and the new exemption has no sunset provision.5Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax6Internal Revenue Service. Whats New – Estate and Gift Tax
For married couples, the combined exemption can reach $30 million through portability, which lets the surviving spouse inherit any unused portion of the deceased spouse’s exemption, called the Deceased Spousal Unused Exclusion (DSUE) amount. Portability is not automatic. The executor must file a federal estate tax return (Form 706) to elect it, even if the estate is far below the filing threshold and owes no tax.7Internal Revenue Service. Instructions for Form 706 (09/2025)
Form 706 is due nine months after the date of death, with a six-month extension available on Form 4768. If that window closes, a simplified late election is available under Revenue Procedure 2022-32, which allows the filing up to the fifth anniversary of the decedent’s death. The late-filed return must include the statement “Filed Pursuant to Rev. Proc. 2022-32 to Elect Portability under § 2010(c)(5)(A)” at the top. No user fee is required and no private letter ruling is needed. After five years, the DSUE amount is gone for good.8Internal Revenue Service. Revenue Procedure 2022-32
Even for estates well under the exemption, filing for portability is usually worth doing. Nobody can predict whether the survivor’s own estate will grow, whether an inheritance will arrive, or whether Congress will cut the exemption again.
The Deceased Spouse’s Final Income Tax Return
A final Form 1040 is due for the deceased spouse covering income from January 1 through the date of death. The standard tax deadline applies, so the return is due by April 15 of the following year. The IRS treats the surviving spouse as married for the full year of the death (assuming they don’t remarry that year), so the survivor can file a joint return for the final year, which usually produces a lower tax bill.9Internal Revenue Service. Filing a Final Federal Tax Return for Someone Who Has Died
The Trust’s Own Income Tax Return
Once the grantor dies and the trust becomes a separate tax entity, it must file Form 1041 if it has gross income of $600 or more, or any taxable income, during the year.4Internal Revenue Service. 2025 Instructions for Form 1041 and Schedules A, B, G, J, and K-1 For calendar-year trusts, the deadline is April 15. Income distributed to beneficiaries is taxable to them rather than the trust, and each beneficiary receives a Schedule K-1 reporting their share.10Internal Revenue Service. Instructions for Schedule K-1 (Form 1041) Distributions of principal are generally not taxable to the recipient because those assets were already taxed or stepped up in basis at death.
A revocable trust can elect to be treated as part of the deceased spouse’s estate for tax purposes during administration by filing Form 8855. This election under Section 645 can simplify administration and let the trust use the estate’s fiscal year and higher income thresholds.
The Step-Up in Basis
One of the biggest financial consequences of a spouse’s death has nothing to do with the trust document and everything to do with the tax code. Property acquired from a decedent gets a new cost basis equal to its fair market value on the date of death.11Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent If a couple bought a house for $200,000 and it is worth $800,000 when one spouse dies, the basis resets so that selling it soon afterward produces little or no capital gains tax.
Assets held in a revocable living trust qualify, because the statute covers property transferred during the decedent’s lifetime into a trust where the decedent kept the right to revoke it. Irrevocable trusts may not qualify if the assets are not included in the decedent’s gross estate; the IRS confirmed that distinction in Revenue Ruling 2023-2.
Community Property States Get a Double Step-Up
How much step-up you get depends on where you live. In the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), both halves of community property receive a full step-up when one spouse dies. The surviving spouse’s half gets a new basis too, even though they are still alive, which can erase decades of accumulated gains on jointly held property. In common law states, only the deceased spouse’s share steps up. The survivor’s half keeps its original basis.
Administering and Distributing the Trust
Once the immediate steps are handled and the trust type is identified, the trustee turns to administration. The first task is a thorough inventory and date-of-death valuation of every asset: real estate, bank accounts, investment portfolios, business interests, vehicles, and valuable personal property. Those valuations establish the stepped-up basis, determine whether the estate exceeds the Form 706 filing threshold, and set each beneficiary’s correct share. Professional appraisals are worth the cost for real estate and closely held businesses.
The trustee pays the deceased spouse’s outstanding debts, final medical expenses, funeral costs, and any taxes owed from trust assets before distributing anything to beneficiaries. A trustee who distributes assets early and leaves creditors unpaid can be personally liable for the shortfall. The trust document and state law set the order of payment when assets will not cover everything.
For real estate held in the trust, record an affidavit of death of trustee (sometimes called a certificate of trust or affidavit of successor trustee) with the county recorder’s office where the property sits. That document, paired with a certified copy of the death certificate, updates the public record to show who now controls the property. Recording fees vary by county but generally run between $10 and $75. Until the recording happens, the surviving spouse may struggle to refinance, sell, or insure the property.
Once debts are paid and administrative expenses are settled, the trustee distributes assets according to the trust’s terms. Some trusts call for immediate outright distribution; others hold assets in continuing trusts for children or grandchildren tied to milestones such as reaching a certain age. The trustee should provide a detailed accounting to all beneficiaries showing what came in, what went out, and what remains. Meticulous records are the trustee’s primary defense against later claims of mismanagement. A trustee who feels out of their depth can hire an attorney, CPA, or trust administration company to handle valuations, tax filings, and distributions; the cost is almost always less than the cost of a breach-of-fiduciary-duty lawsuit.
What the Surviving Spouse Can Change Afterward
What the survivor can touch depends on the structure. With a joint revocable trust that stays fully revocable after the first death, the survivor keeps complete power to amend terms, swap beneficiaries, remove assets, or revoke the trust altogether. With an A/B trust, the survivor can modify Trust A but cannot alter Trust B, which is frozen as the deceased spouse intended. With a QTIP trust, the surviving spouse receives income but has no authority to redirect the remainder.
The trust ends when all assets have been distributed under its terms and all debts, expenses, and taxes have been paid. For trusts that continue through the surviving spouse’s lifetime, that happens after the second death, when the successor trustee completes final distributions, files a final Form 1041, and closes the trust.
Many surviving spouses find it worthwhile to revisit the plan after the first death, especially when the old structure was built around much lower exemption levels. An estate attorney can confirm whether the existing trust still does what the couple wanted or whether the survivor’s changed circumstances call for a new approach.