Many people are in blended families. You might be in a second marriage. You might have a significant other and are cohabitating but not remarried.
These situations beg resolution by good planning. So, if one of the above circumstances apply to you, how do you protect your children’s inheritance and make sure the people you love ultimately inherit what is left?
There are two primary tools we use:
1. trust law to protect the property and to control and direct the remainder interest, and
2. an agreement not to alter the plan.
Let us assume John and Cindy are married and John has a child, Michael, from a prior marriage. Cindy has a child, Janice, from a prior marriage.
John and Cindy realize it is possible that the survivor could get remarried. They also realize the survivor could re-direct assets to their child.
Given this possibility, when they are getting their estate planning put together, they can sign an agreement that indicates neither will alter their estate plan to change the distribution without each other’s consent.
The agreement can also state if the survivor is to get remarried, then the new spouse will waive their spousal rights under a valid prenuptial agreement.
Also, let us imagine that John owns the home and he wants Cindy to be able to live in it for her life if she survives him, with the remainder to Michael. John can direct the home into a trust for her benefit, and he can spell out all the terms of who pays for what, and when the interest ceases.
It would usually cease on cohabitation with another or on death. There are many options. But the idea is to keep your property so it ultimately goes to whomever you want it to go to.
What does signing the agreement not to alter the plan do? It creates equitable rights in Michael and Janice and ultimately protects their remainder interest.
If we do this and we also utilize trust law to protect assets during surviving spouse’s life and to direct where the remainder will go (to Michael and or Janice), then you have secured the manner in which your property will benefit loved ones.
With good planning, your assets will not be lost to a new spouse, will not be lost to a lawsuit, and will not be lost to unnecessary taxes.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. mwinnesq.com