Estate Planning Strategies for Blended Families – Part Two

In Part One of this series, we discovered that estate planning for blended families can be complex, sensitive and difficult. Here are some additional strategies that can be used to help overcome limitations of commonly structured living trusts.

If Bea dies first, she might give her $400,000 to Betty, feeling fine about that since Jay has substantial assets of his own. But, Jay’s major asset, his home, is illiquid. So, without any of Bea’s assets, he could easily use up his liquid assets and need to sell his house (or obtain a reverse mortgage). Another consideration is that even if Jay lives to 90, Betty would only be 45 – a fairly young age to receive her mother’s inheritance. Accordingly, Bea may wish to: a) leave her $400,000 in trust for Jay’s lifetime, during which he is allowed to use interest only, thus, supplementing his income while preserving the principal for Betty when Jay dies; OR b) purchase a life insurance policy for, say, $250,000 or $500,000, naming Betty as beneficiary and leave her $400,000 outright (or in trust, as described above) for Jay.

I’ve just scratched the surface, but the above examples illustrate that careful planning can result in providing for loved ones in a practical manner while avoiding potential conflicts between step-parents and step-children.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

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