By Myka Landry
Over the past few months, I’ve been writing about a family’s impact on estate plans. First, I wrote about how to handle problem children. Then, I discussed how family dynamicsshould be considered when selecting a trustee or executor. I’m going to conclude this discussion with a look at blended families, who need to deal with special issues when preparing estate plans.
In a blended family, individuals usually want to provide for their surviving spouse’s final years, while also leaving some assets to their children. But they often don’t know the best way to achieve that goal when there are children from a previous marriage.
If you have kids from a prior marriage and you leave everything to your spouse outright, there is nothing that prevents the surviving spouse from leaving your assets to her kids, or to her new husband, or to her favorite charity.
So, let’s look at the options.
You could give some of your assets outright to your children, upon your death, through your will or a beneficiary designation.
However, a more common approach would be to put your half of the estate into a marital trust for the surviving spouse. The surviving spouse would be the trustee of the trust and would benefit from the income from that trust during their life. Upon the surviving spouse’s death, the trust could dictate that the remainder of your assets would go to your children.
If both individuals have children from a prior marriage, each of you would prepare a similar estate plan. When one of you passes, half of the estate would go into a marital trust for the survivor. When that survivor passes, each parent’s half will ultimately end up with their respective children.
This can be done either with a will or a living trust. If your plan consists of a revocable trust, the property in the revocable trust will go in the marital trust. If you have a will, then upon your death, any property that is distributed under your will would go into the marital trust.
But you can’t just set up the marital trust and expect everything to go smoothly or work the way you want it to. You have to make sure that your assets can flow into that marital trust. You have to make sure that your ownership and beneficiary designations will allow your one-half of the estate to go into the trust for the surviving spouse.
If you have a blended family, you definitely need to think through your plan carefully and make sure everything is going to work the way you want it. If you want the ultimate disposition to be to your kids, after providing for your spouse during their life, you need to make provisions to do that. You need to coordinate your entire plan.
This is a general overview of this topic. It does not constitute specific legal advice, create an attorney-client relationship or indicate what will work in your particular situation. It is best to consult with a qualified estate planning attorney who can help you with your specific situation.