Deciding who gets what at your death can be a daunting task, all the more so when the family you are trying to plan for includes children you and/or your spouse had in previous relationships. There are solutions to most problems a complicated family presents, but to find the right one requires a great deal of introspection and self-awareness of what your goals are and what you think is best for your loved ones.
In cases where both spouses are financially comfortable, you may simply consider a nuptial agreement disclaiming any interest in each other’s assets so you can leave everything to your own children. Where most of the assets are held by only one spouse, however, the planning requires more thought.
In those cases, the wealthy spouse typically wants to provide for the surviving spouse but may or may not want to benefit that spouse’s children. With estate taxes a concern for only a few families right now, the simple solution is to leave everything in a Qualified Terminable Interest Property (QTIP) trust for the surviving spouse. The spouse gets all the income but can only access principal for medical, educational, or other important maintenance needs. At the surviving spouse’s death, the remaining trust property gets distributed to whomever the first spouse designated when the estate plan was originally drafted.
Restricting the survivor’s access to trust property may be unappealing to some, favoring instead to give everything to the surviving spouse and trusting the survivor to follow the first spouse’s wishes. While that strategy has merit where there is deep trust between a couple, you should bear in mind that even the best family relationships may be tested at times, and step-children who are at first devoted to the surviving step-parent may get written out of their inheritance in a moment of anger. To protect against this, you may consider a mutual written agreement to include each other’s children equally in your estate plans. Such an agreement may not guarantee your children get exactly what you intend, but it does give them standing to claim a benefit from the step-parent’s estate if they are left out at the survivor’s death.
Always take into consideration that no estate plan can be ready for every contingency that might arise after you pass. Step-siblings that get along famously while both parents are alive can turn to rivals if they think they are being unfairly treated. The best protection against this is for both parents to be open and honest with their children, and themselves, about what the estate plan is intended to do and why. It may be that the parents have different goals in mind, in which case, each should have their estate plan prepared by a separate lawyer. But when the couple is in agreement about how the respective heirs are to be treated, ensuring that everyone is on the same page, and that the appropriate documents are put in place, is crucial to avoiding future conflicts.
Written by Andrew C. Grant and published with permission by www.findingassistedliving.com
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