We look around us and we see the changing face of America. Americans are living longer now than ever before. According to the National Center for Health Statistics, the average life expectancy at birth is now 77.2 years. The life expectancy has ratcheted up gradually from 59.7 years in 1930. This, combined with an increased rate of divorce, results in more marriages per individual and more blended families.
Let’s look at a typical situation. Susan and Mike have been married for 5 years. It is the second marriage for each of them and Susan has two children from the prior marriage. Susan wants to make sure that Mike is taken care of after she passes. However, she also wants to make sure that her children are taken care of. Each of these goals is laudable, but how can Susan accomplish them both?
First, Susan could leave everything to Mike and rely on him to take care of her children. However, Susan fears that Mike may remarry after her death and may have children with that wife and that her children may take a back seat to those new children. Second, Susan could leave the assets in a trust that could take care of Mike and the kids. The income could be paid to Mike and Mike could have the authority to dip into the principal for the needs of the children to provide for their health, education, maintenance, and support. For further protection, Susan could ask someone else to make those decisions, like the trust department of her local bank.
Even with the bank as trustee, the interests of Mike and the kids are contrary to each other. As the income beneficiary, Mike would like the trust invested to maximize the current return. As the remainder beneficiaries, the kids would like the assets invested for long-term growth. Another possibility is to use a “total return unitrust” for Mike and the kids. With this unitrust, Mike’s income interest is based on the value of the trust that year. For example, it might pay Mike 4% of the value of the trust annually. This way, Mike and the kids have their interests aligned regarding how the trust should be invested.
Blended families face unique challenges. Preserving the relationships between the step-parent and the step-children after the death of the parent is one of those challenges. Susan can accomplish her goals of taking care of both Mike and her children. By utilizing a unitrust and her local bank trust department she can keep her money from being a friction point between Mike and the kids down the road.
Each blended family has unique circumstances and needs. An attorney who focuses on estate planning can help you determine the best way to take care of and preserve your family.
Mr. Ronald “Chip” Morrison, Jr. is a Board-Certified Specialist in Estate Planning and Administration by the Louisiana Board of Legal Specialization and a member of the American Academy of Estate Planning Attorneys. He has experience in both simple and complex estate matters and has helped thousands of clients throughout southern Louisiana meet their estate planning goals and pass on lasting legacies to their loved ones. To learn more about how you can achieve your estate planning goals, please call our office at (504) 831-2348 or contact us through our website.
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