I’m in a second marriage, and I want assurance that my children will inherit my assets. How can I accomplish this goal?
First, it is important that you have a fully funded living trust—centered estate plan. In some states, a spouse’s right to make a claim for a spousal share applies only to assets passing through the probate court. Therefore, in those states, if your assets are held by a living trust, you can provide for your spouse as you deem appropriate without having your plan rewritten by a statutory spousal claim.
Additionally, if you want to provide for your spouse but also want to guarantee that any assets remaining at your spouse’s death will go to your children, you could include a specially designed qualified terminable interest property (QTIP) trust for your spouse as part of your living trust plan. Such a trust provides to the spouse during his or her lifetime all income generated from the assets held in the trust and the right to make nonproductive property productive.
If guaranteeing your children’s inheritance is a central concern, an irrevocable life insurance trust can provide you with the means to pass a definitive amount of funds to your children. If such a trust is properly drafted and maintained, not only will your children receive this benefit but you also receive the benefits of not having the life insurance included in your gross estate and not having to sacrifice any applicable exclusion amount to establish it.
I want to take care of my husband but also guarantee that my children, from my former marriage, are properly taken care of. What strategies can I follow to achieve both goals?
Here are some alternatives you should consider:
- To avoid having your children wait until both you and your husband die, consider giving them lifetime advances on their inheritance; or leave them a portion of your estate at the time of your death and the remainder after the death of your husband.
- You can leave all or a portion of your estate in a QTIP trust. In this way, your husband gets all the income from the assets and the trust qualifies for the marital deduction; yet it preserves as much of the principal as you elect to pass to your children after your husband’s death.
- You and your husband can enter into a post-marriage agreement that clearly sets forth the rights each of you has in the other’s estate.
Then you can each create an estate plan that will carry out your planning objectives and will be legally binding.
- You can trust your husband to carry out your estate plan at his death. This alternative is fraught with danger, however, and should be avoided if you want to guarantee that your children ultimately receive a certain portion of your estate.
My children are adults, established in their careers and financially secure. What’s wrong with leaving everything I own to my new spouse and stepchildren, who need it much more than my children do?
There is nothing inherently wrong with disinheriting your adult children. However, in making this choice, consider carefully the emotional and psychological consequences to your children. Even if your children do not need your money, they may feel hurt that you did not leave them an inheritance. If you do disinherit certain children, consider meeting with them and explaining why you have made this particular choice. An alternative way to address this would be to write a letter to them, delivered before or after your death.
My spouse and I each have children from a previous marriage. Are there any special planning strategies we should consider?
When both spouses have children from previous marriages, special care must be taken in the estate planning process. There is no one solution that is right for every situation. Your estate planning team needs to understand your goals and desires for all the children. If the second marriage occurs when the children are adults, the considerations are usually financial. If the children are younger, other issues are involved.
A living trust is a particularly good vehicle for making sure that each spouse’s respective property is passed on to his or her own children. It allows you to tailor instructions to your trustee concerning the needs of family members, rather than turning control over to the court.
It is extremely disturbing to hear about situations in which one spouse received property from the other spouse and then left it to his or her own family to the exclusion of the predeceased spouse’s children.
You can easily resolve this problem by establishing a trust for the benefit of your surviving spouse and including directions specifying that the balance of your trust estate be passed to your children. You can make whatever provisions you desire for your surviving spouse. He or she can be the trustee and have access to income and principal as you direct. However, the ultimate disposition of the trust estate remains subject to your control and direction.
My new bride and I each have two children from previous marriages. Do we have any special estate planning needs?
Planning for the “blended family” is among the most challenging aspects of basic estate planning. Dying with no will or a simple will almost always produces unintended consequences, frequently with disastrous results. While goal and priority setting is an important part of the estate planning process for everyone, it becomes especially important in meeting the objectives of a blended family if a proper balance between competing interests is to be achieved. Many unsuccessful second marriages might have survived, and certainly much heartache could have been avoided, if these issues had been addressed before the marriage.
What are some of the competing interests in a blended family?
Here are some examples of competing interests which can be present in the blended-family environment:
- Between your children and your new spouse, who is to get what, and when will they get it?
- After the death of your new spouse, will you divide your assets among your children and your spouse’s children, or will you give them exclusively to your children?
- Are you leaving your property outright or in trust for the benefit of the children?
- Are you treating assets that were owned by you and your spouse at the time of your marriage the same as assets that are the product of the marriage?
- Do you wish to make gifts to your children or expenditures for their education and health during your life even if doing so means that your new spouse will have less after your death?
- How do couples in second marriages deal with these issues?
There is no such thing as a typical answer, not even a majority answer. Experience shows that couples vary dramatically in how they strike a comfortable balance between these competing interests. Among the influencing factors are:
- The relative ages of the two sets of children
- The respective ages of the spouses
- The relative financial, educational, health, and other needs of the spouses and their respective children
- The quality of the relationship between the spouses and their respective relationships with each of the two sets of children
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