Second marriages and blended families

If you are in a second marriage or have a blended family, then you need to plan ahead, carefully. You want to plan to avoid unnecessary administrative costs, taxes and delay: preserving privacy and keeping it in your family. Situations that involve second marriages and blended families often reveal competing considerations. Fortunately, using the law of trusts can often help us accommodate the competing concerns and fashion a comfortable result for all interested parties.

Assume, for instance, Bernard and Denise have each been married in the past, and they want to live together. They have determined getting married is unduly burdensome and not necessary. Bernard has two children from a prior marriage: Teresa and Liza. Denise has two children from a prior marriage: Amy and Tom. Bernard owns the home and wants Denise to be able to live in the house for her remaining single life, if she survives him. What should Bernard do?

First, Bernard and Denise should have it in writing that they DO NOT intend to be married. Bernard should create a trust and deed his real estate into it. It will not go through probate when he passes, and the instructions in the trust will control. He may direct Denise may live there during her life, and when she passes, it goes to his children. He can place a time limit or conditions on her living there. He may also name one of his children as co-trustee. The language needs to be clear about the rights and responsibilities created.

Now, assume Amy has special needs that entitle her to government assistance. Denise’s disposition will want to ensure that Amy’s share may be held in trust for her benefit and perhaps that her brother Tom is the trustee. If done properly, these funds can be made available for the benefit of Amy in a special needs trust while at the same time not jeopardizing her government benefits.

Now, assume Teresa is a surgeon. For asset protection purposes, her share should be left to her “in trust” with a clause that spells out her share will not be subject to creditors or other lawsuits, so that these assets would not be exposed to lawsuits. Further, let us assume that Teresa will never have children because she is infertile and she will not adopt. In this case, it would be wise to spell out in Teresa’s trust that when Teresa passes, the property will go to Liza.

In sum, by the above example we can see trusts can be used to control the flow of assets over time and to preserve government entitlements and protect inheritance from legal claims. If used properly, trust law can prove a wonderful tool to manage competing concerns that naturally arise in the context of cases involving second marriages and blended families.

Mark F. Winn, Master of Laws (LL.M.) in Estate Planning, a local asset protection, estate planning and elder law attorney. www.mwinnesq.com