Reciprocal trust doctrine
Certified Financial Planner glossary · Certified Financial Planner
Definition
The doctrine unwinding mirrored trusts created by spouses for each other, treating each as having created the trust benefiting himself.
Reciprocal trust doctrine in plain English
Spouses each create nearly identical trusts for each other, thinking they have removed assets from both estates. The reciprocal trust doctrine unwinds those mirrored trusts and treats each spouse as having created the trust that benefits himself. Mirrored beneficial interests are the tell. If a stem shows spouses swapping substantially identical trusts, expect inclusion analysis, not a free pass because each trust was labeled irrevocable. Substance over labels decides the result.
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