Blended Families

Tuesday, January 18, 2011

NEET Tips

NEET Tips answers questions posed online to the NEET website

What are factors to consider when estate planning for a blended family?

There are many factors to consider when working with a blended family because these situations have inherent conflicts built into the family relationships. The most obvious conflict is between the surviving spouse and the decedent’s children from a prior marriage. Questions to ask include:

•    How much access should the surviving spouse have to assets in the Marital and Credit Shelter trusts?
•    Should the surviving spouse be trustee, or a co-trustee, of these trusts?
•    Should all the decedent’s assets be tied up in these trusts for the lifetime of the surviving spouse, or should your children from a prior marriage receive something upon your death?
•    Do you intend to treat all of your children equally even though they come from different marriages?
•    Do you treat your stepchildren equally to your own children?
•    Should the surviving spouse have a power of appointment?

There are a lot of issues to go over when a blended family engages in estate planning. It’s best to consult a seasoned estate planning attorney who can point out the issues and the options available, because the conflicts can later tear a family apart if these issues are not handled well.

For more information on blended families, see the articles:

How to Avoid Disinheriting Your Children

A Family Meeting to Discuss Your Estate Plan

Monday, December 20, 2010

NEET Tips

NEET Tips answers questions posed online to the NEET website.

Can you protect your children’s inheritance if you die first and your spouse remarries?

Yes, but you have to avoid simplistic estate planning that leaves everything to your spouse if you die first. Most basic wills leave everything to one’s surviving spouse, who may decide how all the family assets will be distributed upon their death, because they own everything. Instead of leaving everything to your spouse, you can leave your share of the family assets to your children in trust, but give your spouse limited access to the assets in trust for the remainder of his or her life. That way your spouse has access to the assets so that their standard of living can be maintained, but upon your spouse’s death, the assets pass to your children. This is a common planning scenario where blended families are involved. Blended families exist where one or both spouses has children from a prior marriage.

For more information on this topic, see the articles:

How to Avoid Disinheriting Your Children

The Casserole Brigade
 

Friday, August 13, 2010

Press Coverage of Estate Planning this Week (August 13, 2010)

Chuck Jaffe of Marketwatch discusses conversations with his late brother, who advised that people should get their estate planning affairs in order so that they can focus on more meaningful issues when death is near. The brother, who contracted an illness and died 46 days later, suggested that talking about estate planning with an attorney when everyone is healthy is easy, talking about death when one is dying would be unimaginable. See 46 Days to Live: What’s Your Plan? (Aug. 2, 2010).

Floyd Norris of the New York Times recounts how the Bush tax cuts of 2001 came into being, and how politics will affect whether the estate tax comes back in 2011 at a threshold of $1 million. Congressional factions, even more partisan now than in 2001, remain in no mood to compromise, and a return to the $1 million estate tax threshold and higher tax rates appears increasingly likely. See Taxes No Longer So Certain (Aug. 12, 2010).

Pamela Yip of the Dallas Morning News points out that estate planning is not just for the rich. She states that everyone should have a will, and reviews some common estate plan mistakes that people make, including not knowing the value of everything you own, failing to update your plan, leaving everything to your spouse, over-relying on joint tenancy, and picking the wrong people as executors and trustees. See Estate Planning Lets Your Will Rule After You’re Gone (Aug. 6, 2010).

Jeffrey McKenna, Esq., writes in the Lincoln County Record that almost always a financial account that has a beneficiary designation will overrule provisions in a will that would have the account pass to someone other than the listed designated beneficiary. Beneficiary designations are common on life insurance, annuities, and IRAs, all of which are contracts. The associated beneficiary designations are a part of the contract, and a provision in a will cannot change the contract. Reviewing your beneficiary designations every couple of years on these and other accounts is essential to ensure your estate plan works the way you intended it to. See What Controls: The Will or “The Box” (Aug. 13, 2010).

Irving Blackman, Esq., writes in ContractorMag.com, about the estate planning issues that arise when a client is planning for second or third marriages. Types of issues that are prevalent include age differences between the new spouses, health issues, kids from prior marriages, lack of a premarital agreement, and how to provide for the surviving spouse without disinheriting your children. See Estate Planning for Second, Third Marriages, Etc. (Aug. 9, 2010).

Friday, September 18, 2009

Press Coverage of Estate Planning This Week (September 18, 2009)

Jon Tevlin of the Star Tribune (Minneapolis, Minn.) recounts a cautionary tale of misapplied trust in naming an agent on a power of attorney for finances to manage funds for an adult with autism.  When naming a power of attorney for finances, choose someone whose trustworthiness is beyond doubt.  See What Happened to a Vulnerable Man’s Money? (Sept. 12, 2009).

Nolan Baker and Mark Clair write in the Toledo Free Press on the importance of planning when you have a blended family.  If you are not careful, your children could be left with no inheritance.  See If You Re-Marry, Make Sure to Protect Your Children (Sept. 18, 2009).

Charles Ross of the St. Louis American lists several problems with the probate process that many people would prefer to avoid, including delays in receiving an inheritance, costs of going through probate, and the lack of family privacy.  See What Are the Pitfalls of Probate? (Sept. 18, 2009).

James P. O’Malley writes in The Ledger (Lakeland, Fla.) about how too many family businesses fail after the first generation, and how to prevent that from happening to you. His advice includes writing a buy-sell agreement, gifting the family business to the next generation to reduce estate taxes, and most importantly, starting the planning process now instead of putting it off.  See Working on Your Estate Plan Now Will Pay Off Later (Sept. 14, 2009).

Michaela Cavallaro of Dow Jones Newswires recounts how an Irrevocable Life Insurance Trust paired with creative funding mechanisms to pay for a new insurance policy allowed an elderly widow to save her beneficiaries a big chunk of her estate from estate taxes.  See A Sophisticated Solution to a Tax Issue (Sept. 15, 2009).

Friday, September 04, 2009

Press Coverage of Estate Planning This Week (September 4, 2009)

Kate Ashford of CBS MoneyWatch.com wrote three articles addressing getting your finances and estate planning in order, what questions to ask your parents about their estate planning, and what steps are necessary when a loved one passes away.  See Keep the Money in the Family (Sept. 2, 2009).

Heidi Brown of Forbes.com writes about several areas of estate planning, including planning for minors, planning gifts for charities or family members, ensuring your medical wishes are known, and ensuring beneficiary designations are up to date, particularly if your marriage is ending.  See Your Go-To Guide to Estate Planning (Sept. 2, 2009).

Barbara Kate Repa of Caring.com covers some of the basic provisions that you should consider including in your will, such as naming an executor, specifying beneficiaries and alternate beneficiaries, how taxes should be paid, and providing for pets.  See Aging and Caring: 10 Things to Consider Including in a Will (Sept. 2, 2009).

Mark Kanny of the Tribune Review (Pittsburgh, Pa) reviews a recent book on blended families – where one or both spouses has children from a prior marriage – and highlights some of the major issues that tend to arise.  See How to Estate-Plan Your Blended Family (Aug. 31, 2009).

Kelly Greene of the Wall Street Journal discusses naming a trust as a beneficiary of an IRA, including some of the benefits and drawbacks, and what to avoid.  See Trust as Beneficiary of IRA is a Popular Strategy (Aug. 29, 2009).

Tuesday, August 18, 2009

Estate Planning Tip of the Week

What is a Blended Family, and how does a blended family affect estate planning choices?

By blended families, we mean a situation where one or both spouses have children from a prior marriage.  It's important for the estate planner to point out the potential landmines in a blended family situation, and for the married couple to plan accordingly.

For instance, planning for blended families usually calls for a revocable living trust so that the first spouse to die does not inadvertantly disinherit their children from the prior marriage.  If the first spouse to die instead simply passes all of their assets to the surviving spouse through a will, the surviving spouse may later exclude the decedent spouse's children in their estate planning, which is usually not what the deceased spouse would have wanted.  Through a revocable living trust, each spouse can ensure that all of their children will remain beneficiaries of the inheritance.

Other considerations include whether to limit (and to what degree) the surviving spouse's access to the deceased spouse's assets for the surviving spouse's lifetime, who to name as trustee of the various trusts, and how to protect your children's inheritance from the surviving spouse's new romance.

For more information on estate planning for blended families, see How to Avoid Disinheriting Your Children and The Casserole Brigade on the Articles Page.

Friday, July 10, 2009

Press Coverage of Estate Planning This Week (July 10, 2009)

Kevin Bourke writes in the Santa Barbara (Calif.) Independent that failure to update your beneficiary designations on financial accounts such as IRAs can lead to surprise endings, like long-divorced ex-wives receiving sizable retirement plans while the children get nothing.  See Accidentally Disinherited (July 7, 2009).

Harriet Johnson Brackey of the South Florida Sun-Sentinal discusses arranging for guardianship of minor children in complex family arrangements, as well as providing some tips to strengthen the chances a court will abide by your wishes.  See Got a Will?  Better Make Sure Who Gets the Kids (July 10, 2009).

Jane Bennet Clark of Kiplinger's Magazine contends Michael Jackson had his estate plan in order, at least more so than most Americans.  She offers some general advice on what should be included in an estate plan.  See 4 Estate-Planning Lessons From Michael Jackson (July 2009).

Karin Grablin writes in the Bradenton (Fla.) Herald that soon after divorce it is important to review your estate and financial planning.  Issues include planning for blended families if you remarry, and guardianship of minor children, among others.  See Make Estate and Financial Planning First Step After Divorce (July 7, 2009).

Candice Choi of BusinessWeek provides a brief overview of the differences between wills and trusts, and some of the advantages of choosing one over the other.  See Will or Trust? Understanding the Differences (July 3, 2009).

Sarah Arnquist of the New York Times discusses planning for funeral arrangements and the options available to avoid the expense of a full-fledged funeral, including cremation and home funerals.  See The Caregiver's Last Expense (July 8, 2009).

Friday, May 29, 2009

Press Coverage of Estate Planning This Week (May 29, 2009)

Tim Grant of the Pittsburgh Post-Gazette discusses issues that arise in estate planning for blended families and some of the traps that catch those unprepared, such as deciding who inherits IRA accounts.  See Divorce, Remarriage Can Make Estate Planning Especially Challenging (May 29, 2009).

Melissa Korn of Dow Jones Newswires writes about leaving money to children in ways that encourage prudent behavior, in other words not having the beneficiary spend it all on a fancy car.  One method is to test your children by leaving them a small amount now to see what they do with it.  See Redesigning Trusts to Keep Kids Working (May 28, 2009).

Betsy Brill of Forbes reviews what to consider when naming charities in your estate plan, and whether specific charities should still be on your list.  She offers some questions to ask charities and advises that fact checking may turn up some surprises.  See Giving While Living . . . And Beyond (May 29, 2009).

Frances Carlisle of Law.com discusses pet trusts, and why Leona Helmsley's dog "Trouble" really does require a $2 million pet trust.  One word of caution: money in pet trusts is not a charitable contribution and thus may remain part of your taxable estate.  See Helmsley Pet Trust Helps Highlight Issues for Lawyers (May 29, 2009).