Women’s Series: Estate Planning for Blended Families
A blended family is a married couple in which one or both spouses have children from a previous marriage or relationship. In most instances individuals in blended families want to provide for their spouse as well as their children from their previous relationship if they predecease their family. There are several ways to accomplish this goal based on what the family’s specific goals are once one of the spouse’s is deceased.
Working with an estate planning attorney can help you find an estate plan that will be a good fit for your family. Some options and examples for different ways to set up an estate plan for blended families are as follows:
- Revocable Living Trust: A spouse may set up a revocable trust so that he/she can make changes in the trust before death and once the spouse/grantor dies the trust becomes irrevocable. The spouse/grantor can set up the trust with them as trustee and have the trust beneficiaries be his/her children. Once the spouse passes the trust is either held until the children reach a certain age or the trust is distributed.
- Qualified Terminable Interest Property (QTIP): A QTIP trust is very common amongst estate planning strategies. A QTIP is set up so that once the first spouse passes the QTIP pays the surviving spouse income generated from the trust. Once the second spouse passes the trust assets are passed to the beneficiaries. In this case once the first spouse dies their QTIP becomes irrevocable and the second spouse cannot make changes to the original trust document.
- Irrevocable Life Insurance Trusts (ILIT): This is a trust that owns a life insurance policy. The trust is irrevocable so the beneficiaries cannot change. This is a strategy that can either be left to the surviving spouse or the kids that is completely separate from the other assets in the estate.
- Family Limited Partnerships (FLP): A FLP can be useful for a family that has a lot of real estate property. The FLP is comprised of parents and children and the structure can protect family assets from the claims of spouses and former spouses.
- Life Estates: There are instances where a spouse would like the surviving spouse to be able to use a piece a real estate or asset for the rest of their life and once surviving spouse passes the piece of property is left to the kids. This can be made as part of the Will.
- Gifting: Gifting can be made to your children prior to your death as well. The estate law is that any one person can make up to $5,000,000 worth of gifts during their lifetime without having to pay taxes.
Like I said in my last newsletter about divorce; we are very fortunate to live in a community with great law firms. If you need help in this area I would recommend you contact a local estate planning attorney and get started on a plan that will work best for your blended family.
Our next Women’s Newsletter will be about Death of a Spouse.
CERTIFIED FINANCIAL PLANNER™
Any opinions are those of Christina Jones and not necessarily those of Raymond James. RJFS financial advisors do not render legal advice. You should discuss any legal maters with the appropriate professional.
Begley Admin. What Blended Families Should know about Estate Planning – Special Report. Retrieved from https://www.begleylawyer.com/2012/02/what-blended-families-should-knowabout-estate-planning-special-report/.