Estate Planning Becomes Challenging for Second Marriages and Blended Families
When one or both spouses are on their second or subsequent marriage, or in cases where families are blended together in a non-marital environment, Estate Planning can present some unique and challenging issues.
As an Estate Planning Attorney I often work with clients who are on their second or third marriage, and each spouse may have children from a previous marriage or relationship. They may also have children together. Other clients may live in a long-standing marriage-like relationship and they, too, frequently have children together or children from previous marriages or relationships.
When I work with clients under these circumstances to help them create a plan for the management and disposition of their assets upon their death, they often tell me how important it is to them to provide for the welfare of their present spouse or significant other, but they also want to ensure that there will be sufficient assets remaining for their children, including the children of their previous marriage or relationship. Without careful estate planning, these children can often be overlooked, or later disinherited altogether.
Many individuals believe they can simply leave their share of the assets to the surviving spouse or significant other, and in turn that survivor will ensure that the deceased spouse’s children will be taken care of under the Last Will & Testament the survivor had prepared. While this may sound good in theory, all too often things don’t work out this way. A surviving spouse may remarry and create an entirely new estate plan, which does not include the children of the former spouse. Once a surviving spouse remarries, his or her assets are often commingled with the new spouse, and creating a new estate plan is common. Furthermore, a surviving spouse may not be able to preserve and shelter the money against claims from creditors, judgments, long-term care costs, etc. There is also a risk that the assets could become exploited if the surviving spouse becomes vulnerable in his or her old age. The possibility for problems are simply too numerous to address in this short blog post.
With proper planning, a client can provide not only for the support and welfare of his or her surviving spouse, but also for the children of the client’s former marriage or relationship. Since Wisconsin is a marital property state, for those clients residing in WI good planning often begins with a Marital Property Agreement (a type of Pre-Nuptial or Post-Nuptial Agreement) in order to classify which assets are marital assets and which are individual assets. Once the spouses classify their assets, their estate planning documents can address the management and disposition of those assets upon their death. Certain assets may pass to the surviving spouse directly or in a trust, and other assets may pass to the children directly, or be held in trust for their benefit. Depending upon the size of a person’s estate and the potential estate tax consequences, we sometimes pass assets to a trust known as a Qualified Terminal Interest Property Trust (QTIP Trust), which pays income to the surviving spouse during his or her lifetime, but ultimately passes the principal to the children of the first spouse to die. Such planning should be done by a qualified Trust Lawyer.
Estate planning under the circumstances mentioned above can be quite complicated, and everyone’s situation is unique. There are simply too many variables and issues to address in one article, but people would be well advised to seek the assistance of an experienced Estate Planning Attorney to ensure that their loved ones are protected. Contact Kosa Law Office today to schedule an appointment. I welcome the opportunity to assist you.