Living Trust Strategies for Blended Families | Estate Plan Pros
Blended Family Tips

Getting remarried can be an exciting time.  After the dust settles, take a moment to consider how your new relationship will impact your children.  If you name your new spouse as a beneficiary on life insurance or retirement, you could be effectively disinheriting your own children.  If you die first, what will your spouse receive, and what will your children receive?

These issues are increasing: in 2013, 40 percent of marriages had at least one spouse who had been down the aisle before, according to the Pew Research Center

Living Trust Options

Assets included in a typical living trust can be set up to go to the surviving spouse, and after the death of the surviving spouse, the remaining assets can be distributed to the children.  Before jumping at this solution, consider your expectations – is it ok if a surviving spouse spends everything?  Or could the spouse be locked into a long term investment that preserves the capital – good for the kids, but maybe not so good for the surviving spouse’s needs.

Another big question is who should manage the trust assets.  If it’s the new spouse, will the children be concerned about their inheritance?  If it’s the children, will the spouse receive the care and consideration that you would want?  Depending on the circumstances a neutral money manager may be an appropriate buffer between the current beneficiary (your spouse) and the contingent beneficiaries (your children).

Add to this the tax consequences of potential estate taxes and whether the assets will get a step up in basis at the death of the first and the second spouse, and you can see how quickly the decisions can become a complicated balancing act.  Fortunately, there are a lot of good tools experienced estate planning attorneys can use to help families achieve most – if not all – of their goals.

Beneficiary Designation Traps

Assets like your life insurance policies and retirement plans aren’t governed by your will or living trust.  Each company has their own beneficiary designation form that you fill out controlling where their benefits will go.  Not updating those is one of the biggest mistakes people with blended families make.  Many ex-spouses have been pleasantly surprised to find themselves the beneficiary of a retirement plan or life insurance policy much to the chagrin of other family members. 

It is also important to remember that a surviving spouse as the primary beneficiary of a retirement plan now has the ability to change the beneficiaries.  The surviving spouse will need to be careful to maintain the deceased spouses retirement in a separate account to ensure that the beneficiary designations stay in effect.

Don’t forget the Doctor

Health care decisions are another source of potential conflict.  If you become incapacitated, will your spouse keep your children informed?  Who should make important decisions about your treatment and care?  If you don’t’ spell out in advance who has access to information, and who will be making decisions, the door is left open for future conflict. 

Communication is Key

As with most things in life, good communication can eliminate future problems.  The decisions you’re making aren’t things people are likely to talk about around the family bbq, and are topics some people approach with dread.  The reality is that most children appreciate knowing what your wishes are.  Do them the favor of planning carefully, documenting your decisions, and communicating the key decisions to the people who should know.

Tags:Blended Family

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Erik Hartstrom

Erik is the founder of Estate Plan Pros, a leading estate planning practice in Elk Grove.  Erik’s practice focuses on Estate Planning Law. In Estate Planning, Erik works with clients to make the process simple, so clients can focus on more important things. He is a local authority for specialized estate planning instruments, like Special Needs Trust, Irrevocable Trusts, or other focused documents. Erik has litigated, negotiated, and mediated the gamut of family law cases. With this unique perspective as a family law and estate attorney he can often spot issues otherwise overlooked. Prior to graduating he worked as a legislative analyst for a non-profit organization, and volunteered as a youth counselor. Erik currently participates in local politics and is an active member of his local church. Erik is very happily married and has two young sons. Together, his family loves to get outdoors and enjoy the varied activities the Sacramento region has to offer.


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