Do You Have Kids from a Prior Marriage?
Blended families and subsequent marriages create important and unique issues when it comes to estate planning. You may need to ensure that BOTH your current spouse and any children you have from a prior marriage are taken care of after you pass away. If the right estate planning is not in place, you may inadvertently disinherit your children. The good news is that estate planning can take all of these factors into account.
Setting Up a Marital Trust
It is common for married couples to leave everything to one another through their Wills or Revocable Trusts, or list their spouse as the sole beneficiary of any assets that allow for this designation. The result is that if one spouse passes away before the other, the surviving spouse will own all of the assets left behind outright. While this may work for some families, when it comes to blended families this strategy can cause serious problems.
One way to provide for a current spouse without leaving out children from a prior marriage is to place some or all of your assets in a trust (generally created after your death) that your surviving spouse can use during his or her lifetime. Once your spouse dies, all of the property in that trust can go to your children from your current and prior marriage, or to other intended beneficiaries. It’s not a “leave assets to one or the other” approach. You can provide for both! Basically, you control that property from the grave!
But Be Careful with Beneficiary Designations !
The plain and simple beneficiary designations on assets (like life insurance, retirement plans, etc.) that allow for outright distribution to the surviving spouse can inadvertently wreak havoc on an estate plan when a blended family is involved. These complications can apply to a couple who has children from prior marriages, someone who remarries late in life, or someone on their second or third marriage and beyond.
For example, you may purchase a large life insurance policy and designate your current spouse as the sole beneficiary and pass away shortly thereafter. Since the beneficiary designation takes precedence over your estate planning documents, the proceeds of the life insurance will not be placed in the Marital Trust but instead will be distributed outright to your current spouse. Your spouse could then change their documents to disinherit your children !
If you had instead named the Marital Trust as beneficiary, you could have determined when and how the funds would be spent for the benefit of your heirs. As an example, the funds could be used to provide support for your surviving spouse during his or her lifetime while also allocating a portion to help your children to pay for college, finance a down payment on a first home, pay for a wedding, or start a business. The key is that the money can be available for your spouse, but not with unrestricted control, and still available for your children.
Ensuring Your Wishes Are Followed
While you hope that a surviving spouse will honor your wishes even if they are not in writing, you may accidentally disinherit your children. Instead, a knowledgeable estate planning attorney will use your Will or Revocable Trust as the centerpiece of your estate plan and make sure to coordinate and align the beneficiaries on your assets so that your intent will become reality once you have passed away. Hamrick Law can explain all of the options available to you and put together a plan that best suits your family’s needs.
Contact Hamrick Law to Ensure Your Assets Pass the Way You Want!