There are many different legal devices that can be used to satisfy a wide range of estate planning objectives. You should never assume that you have to settle for an arrangement that is less than ideal.
An attorney from our firm can gain an understanding of your wishes and make sure they come to fruition, and we are always here to help. With this in mind, let’s look at a very effective approach to estate planning for parents that are getting remarried.
If you are a parent who has done well financially, you may have concerns before you get remarried to someone that might outlive you. How can you be sure your spouse will honor your wishes with regard to the inheritances for your children?
Attitudes can change over the years, and divorces are sometimes bitter. And of course, you may have a good relationship with your spouse, but your children and your partner may not see eye to eye.
A premarital agreement can be part of the plan under these circumstances. These agreements can work to the advantage of both parties, and it is an honest way to enter into a marriage.
Everyone has heard of prenups, but the document that we want to focus on here is the qualified terminable interest property (QTIP) trust.
To implement this strategy, you fund the trust with appreciable assets and any other property that will be part of your estate. Your spouse would be the first beneficiary of the trust, and your children would be the final beneficiaries.
You engage a trustee to act as the administrator after you are gone. From a purely legal perspective, any adult that is willing can assume this role.
However, the trustee must be a highly effective money manager. This person should also be someone that does not have any inherent bias toward your children or your spouse. Longevity will also be a source of concern because the trust may be active for an extended period of time.
A lot of people will choose a professional fiduciary such as a trust company or the trust department of a bank to provide the trustee services. When you go this route, there is organizational oversight, there is no emotional involvement, and a qualified professional will manage the funds.
If you do in fact predecease your spouse, they will receive distributions of the earnings that are generated by income producing assets in the trust.
The surviving spouse would also be able to use assets that are owned by the trust. For example, they could live in a home that is titled to the trust.
Your surviving spouse would not be able to change the terms of the trust in any way. After their passing, the children would become the direct beneficiaries of the trust.
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