The number of remarriages has been steadily rising over the past few decades. Families now include children, stepchildren, former spouses and in-laws. When it comes to estate planning for such families, the concept of who gets what after a death in the family can become complicated. Here, the estate and trust planning law specialists at Snee, Lutche, Helmlinger & Spielberger, discuss an action plan and how to proceed when faced with blended family estate planning.
Agree to a Course of Action
The crucial first step in any blended family estate planning is to come to an agreement of a course of action with one’s spouse. In many cases, remarried couples want to ensure the surviving spouse will be cared for in the event one partner passes away—with the children from their previous marriages becoming the ultimate beneficiaries.
Name a Beneficiary
Naming a primary beneficiary allows the deceased’s assets to be directly inherited by the designated individual, as beneficiary designations trump everything else, e.g., if your spouse is named as the primary beneficiary of an asset such as an insurance policy while your children are listed as equal contingent beneficiaries, the asset automatically goes to your spouse. It is possible to have multiple primary beneficiaries. If the primary beneficiary passes away at the same time as you, and there is no contingent beneficiary named, the asset will pass to your estate and be distributed per the terms of your will. If you don’t have a will, the assets will pass in accordance with Maryland Statutory Law, and if you have a surviving spouse and children, the assets, will likely be divided.
Have a Trust
Remarried couples usually have a trust of some kind to list how their assets are to be distributed. Some common trusts include revocable, marital trusts, QTIPS and ILIT.
- Revocable: A revocable trust is s a trust organized and funded while the owner of the assets is still alive, and the person who establishes the trust (grantor) typically maintains complete access to and control over the trust assets. This allows the grantor to dictate who receives the assets both before and after death. While the grantor is alive these trusts can be amended changed or terminated.
- Marital trust and QTIP: A marital trust is created to take advantage of the federal tax laws that exclude inheritances between spouses from estate tax. They generally are not effective until the first spouse passes away, at which point the trust is funded with the assets the grantor has identified for this purpose. A QTIP (qualified terminable interest property trust) is to provide income and potentially principle for a spouse while preserving the underlying assets of the trust to the designated beneficiaries
- ILIT: An irrevocable life insurance trust can be used to allow the death benefit from a life insurance policy to pass outside the grantor’s estate and therefore can shield the life insurance proceeds from federal estate taxes.
Healthcare Proxy and Communication
Discuss healthcare powers of attorney and living wills designating an agent in the event a spouse becomes incapacitated. Assigning an agent early on leaves less room for confusion. Meaningful and ongoing communication is crucial in setting up a well thought out blended family estate plan. Having everyone know what is expected of them leaves no room for unwanted surprises. This allows for a more harmonious transition of assets.
How SLHS Can Help
When dealing with complicated matters such as blended family estate planning, having an experienced law firm that specializes in estate and trust planning is vital. At Snee, Lutche, Helmlinger & Spielberger, we believe every family deserves to consider the future with peace of mind. For more information, we urge you to contact us today.