Editorial Reviews. Review. “Blended families face unique challenges when they begin to plan Estate Planning for Blended Families: Providing for Your Spouse & Children in a Second Marriage Estate Planning for Blended Families: Providing for Your Spouse & Children in a Second Marriage 1st Edition, Kindle Edition.
Table of contents
- Estate Planning Around a Second Marriage - Fidelity
- Estate Planning for Blended Families: Providing for Your Spouse & Children in a Second Marriage
- Mutual Funds and Mutual Fund Investing - Fidelity Investments
- Smart estate planning for blended marriages
- The second time around
Andy has two children, Alexis age 24 and Lauren age 21 , from his previous marriage to Maureen. Andy wants to provide for his new wife, but does not wish to disinherit his children. He creates a trust that names his two children as remainder beneficiaries. They institute litigation against Paris over extravagant distributions from the trust. Andy and Maureen marry when they are in their 60s.
Maureen has significantly more assets than Andy. Both Andy and Maureen have children from previous marriages.
Estate Planning Around a Second Marriage - Fidelity
Andy and Maureen have a happy first marriage with two children, Alexis and Lauren. Alexis is married to Ken, who has children from a previous marriage and has difficulty keeping a job. Blended families can face complex estate planning challenges. Issues can arise between spouses, or between children and their spouses. Typically, individuals in blended families want to provide for the spouse as well as the children from the previous marriage. Several trends related to divorce have increased the number of blended families. Estate planning for blended families is a form of asset protection.
In a second marriage, one spouse often moves into the home of the other.
Estate Planning for Blended Families: Providing for Your Spouse & Children in a Second Marriage
The home is not always retitled jointly, nor should it be. However, the individual who owns the home often wants the spouse to have the right to live there for his or her lifetime. This can be accomplished by giving the surviving spouse a life estate in the home. Consideration should be given to requiring an automatic termination of the life estate if the surviving spouse moves out or abandons the property for a certain period of time.
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Provisions should also be made regarding whether the property can be rented or sold, and, if so, who is entitled to the rent or proceeds of the sale. These trusts are designed to benefit the surviving spouse and children. When drafting a spray spendthrift trust, the following should be considered:. These trusts are designed to benefit your child and his or her descendants.
The trust may include the following provisions:. An ILIT allows you to provide for your children with life insurance and to use your remaining estate to provide for your spouse. The trustee of the ILIT purchases a life insurance policy on your life, and you pay the premiums. ILITs offer two major advantages.
Mutual Funds and Mutual Fund Investing - Fidelity Investments
They prevent children from being disinherited because the trust names them as sole beneficiaries of the life insurance policy, and they ensure that children will receive inheritances promptly because the policy will pay the trust immediately upon your death. A family limited partnership FLP is an ideal tool for a family who owns real estate. The real estate is transferred to the partnership, which is composed of parents and children.
Both arrangements can be used to protect family assets from the claims of spouses and former spouses. Contracts to Make a Will.
When appropriate, a contract to make a will offers a simple estate planning solution. Often, spouses want their wills to stipulate that everything will be left to the surviving spouse, with remaining assets to be divided on some basis between children from both families upon the death of the second spouse.
But, at the death of the first spouse, the will of the surviving spouse typically becomes non-enforceable since it can be changed to disinherit the children of the first spouse. It is possible for the parties to enter into a contract to make a will, which essentially prohibits the surviving spouse from changing his or her will. The disadvantage of this strategy is that the surviving spouse may have a valid reason for wishing to change the will, completely unrelated to disinheriting the children of the deceased spouse or to delaying their inheritance.
With a QTIP, the will or trust of the spouse who dies first gives the surviving spouse the right to income from assets held in the trust. If one was single for a long time before the marriage, his or her investment, insurance and bank assets may name his or her children or even former spouse as beneficiary.
Be aware that any account beneficiary designation will take priority over the provisions of a will.
Smart estate planning for blended marriages
Instructions detailed in a will are vulnerable to state laws designed to prevent the disinheritance of a spouse. These rules vary, with some states taking into consideration how long the couple was married and if they have young children.
It is common for a married couple to own a home together with both spouses designated as joint tenants with right of survivorship. This means that when one spouse dies, full ownership transfers to the surviving spouse, who can then pass it on to whomever he or she pleases.
However, if one spouse wants to ensure the home will eventually pass on to his or her children from a prior marriage, it is important to consider other title options, such as tenants-in-common. This strategy permits each spouse to leave his or her share of the home to whomever he or she wishes.
Another way to help ensure heirs receive an inheritance may be to create an irrevocable life insurance trust ILIT. This strategy assigns assets to be used to pay for life insurance premiums on a policy naming the children as beneficiaries. This enables one spouse to leave all other assets to the surviving spouse. The surviving spouse then has the right to disseminate any remaining assets to whomever he or she wants upon death, while the first-to-die spouse is assured that his or her own children will receive the insurance proceeds upon his or her death.
The second time around
Beyond who raised whom, you also may wish to consider who is taking care of you when in the latter stages in life. For example, you may want to increase the inheritance for a child who contributes greatly to your care in old age, especially if he or she spends significantly more time and money than other heirs. This also demonstrates the importance of communicating your wishes — and your rationale — for how you plan to transfer assets upon your death to everyone in the blended family.
By explaining the difference between what is fair and what is equal, you can help avoid discord once you pass away.
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Accessed June 28, The advisory firm providing you this report is an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives, and is not an affiliate company of AE Wealth Management, LLC.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by AE Wealth Management. None of the information contained herein shall constitute an offer to sell or solicit any offer to buy a security or insurance product.