While estate planning can have complexities for all families, additional complications may exist for those who remarry. On top of considering your spouse and children in your current marriage, you may have children from prior marriages and stepchildren. Ensuring that everyone receives fair treatment can become a challenge. The following provides tips to help you make plans for your estate.

Communicate First

Sit down with your spouse and discuss your desires. Make a list of assets that you each brought into the marriage, as well as assets obtained after you got married. Discuss how you want these assets distributed after your death. How will you treat children from prior marriages? Will you each make your own provisions or will you consider all of the children jointly? Does a divorce decree from a previous marriage have provisions that need consideration in your estate plan? All of these concerns impact how you distribute your estate.

Once you reach agreement with your spouse, all estate planning documents should support these decisions. Even if you have a will, your spouse can often override the terms and elect to receive a statutory percentage of your estate. To prevent this, you typically need a prenuptial or nuptial agreement, detailing how assets will be divided after death.

Discuss your plans with all impacted family members. Especially in situations where there are stepparents and stepchildren, you should communicate your estate plans. You don’t want your children to believe that your spouse has unduly influenced you or you don’t care about them anymore. Be open and upfront and hopefully, disagreements and misunderstandings will be avoided after your death.

Consider Trusts

Determine whether trusts are necessary to protect your children’s inheritance. When you leave assets outright to your spouse, he or she controls the ultimate distribution of those assets. You may want to use a qualified terminable interest property trust (commonly referred to as a Q-TIP trust) to protect your children’s interests. This allows you to designate assets to the trust with income distributed to your spouse during his or her lifetime. Since this trust qualifies for the unlimited marital deduction, no estate taxes will come due when you die.

After your spouse’s death, the principal is distributed to your heirs. This strategy may not work if your spouse and children are approximately the same age, since your spouse could outlive your children.

Review Benefits

People commonly forget to update beneficiary designations for retirement accounts, individual retirement accounts, and life insurance policies. If you overlook the task of changing the designations, these assets will be distributed to the named beneficiaries, regardless of the terms of your estate planning documents. So take a look at those designations to ensure coordination with your estate plans. Also, review your life insurance policies. You may need more life insurance to help ensure that all your heirs receive equitable treatment.

Check Titles

Review your property titles. Jointly owned property automatically passes to the co-owner. You cannot change this distribution through a will.

Next Steps

Estate planning requires an in-depth understanding of financial planning and tax implications. Contact us to speak with a trusted advisor who can help you take the right steps.

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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.

 

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