Though the divorce rates have been getting lower over the last couple of decades, it is still relatively common. If you decide to get remarried after having been divorced, and you have children from your previous marriage, you may have some estate planning concerns.
You want to leave suitable inheritances to your children so you are reluctant to leave everything to your spouse. The situation is amplified if you are marrying someone who is significantly younger and you are bringing a good bit of wealth into the marriage.
Premarital Agreement
Obviously, a premarital agreement can be useful under these circumstances. Is this a romance killer? It depends of the people involved, but in some cases, both individuals will understand the benefits.
When the terms of a potential separation are decided in advance, a couple can go forward with a certain peace of mind, and the honesty and transparency can actually strengthen the relationship.
Qualified Terminable Interest Property Trust
There is an effective estate planning solution embraced by many people in this situation. The Qualified Terminable Interest Property (QTIP) trust is an estate planning device that can give you the ability to provide for your spouse and your children.
To implement this plan, you fund the trust, and you designate a trustee to act as the administrator. You have to watch out for potential favoritism or conflicts of interest because the trust is going to benefit people who may have conflicting interests.
If you use someone who knows your spouse and your children well, they may be placed in an uncomfortable position. In that situation, trust companies and the trust departments of banks provide trustee services, and a professional can be relied upon to act in an impartial manner.
There are no longevity concerns if you use an outside fiduciary, and income-producing assets will be managed by someone who is fully qualified to maximize the resources.
Your spouse would be the initial beneficiary of the QTIP trust, and your children would be the ultimate beneficiaries. If you predecease your spouse, the trustee would distribute the trust’s earnings to your spouse for the rest of his or her life.
When you are drawing up the trust, you could instruct the trustee to distribute portions of the principal at the trustee’s discretion. Your surviving spouse could also live in a home that is held by the trust.
Once the trust has been established, the terms are set in stone. Your surviving spouse would not be able to make changes so the principal would be protected.
After your surviving spouse is gone, the children would inherit the resources in the trust.
Immediate Direct Inheritances
This can be a good solution to a thorny problem, but there is an emotional factor to consider. There is no candy coating the fact that your children would not receive their inheritances until your surviving spouse dies.
They would have a vested interest in this event, and this can create an awkward dynamic. As a response, you may want to arrange for your children to receive some direct inheritances shortly after you pass away.
Download Our Free Worksheet!
In addition to the many blog posts that you can explore, there are other written materials on this site, including our estate planning worksheet. You will gain a more thorough understanding of the process if you go through it, and it is being offered free of charge.
To get your copy, visit our worksheet access page and follow the simple instructions.
Need Help Now?
If you have already decided that it is time for you to work with a Charlotte, NC estate planning lawyer to create a plan, we can help. As you can see from this post, there are targeted solutions to address any and all concerns.
When you choose our firm, we will listen as you explain your objectives and make recommendations. At the end of the process, you will go forward with a carefully crafted plan that is ideal for you and your family.
You can schedule a consultation in Charlotte or Huntersville, NC if you call us at 704-944-3245. The number for our Ashland, KY location is 606-324-5516, and the number for our Florence, KY location is 859-372-6655. If you would rather send us a message, fill out our contact form and will get back to you ASAP.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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