Revocable Trust Planning for Second Marriages

Revocable Trust Planning for Second Marriages

Two divorcees in unequal financial situations, each with beloved children, decide to get married. What could go wrong?

Many things, of course. But establishing an estate plan that provides financial support for “blended family” members doesn’t have to cause heartache. It is not unusual that spouses’ views will differ with expect to matters like whether assets should be allocated differently from one set of children to another. But these differences can be worked out if they are openly discussed and addressed, preferably with assistance from an estate planning professional.

Couples are encouraged to reach agreement on estate matters before marriage;but, in any case, the partners must clearly express their intentions through legal documents. For example, imagine a husband who passes away and leaves everything to his children from a first marriage, surprising his surviving spouse, who may not have enough income on which to live.

The simplest and most effective way to provide for the flexibility and transparency needed in a second marriage is for both spouses to use a “pourover will” combined with a revocable trust. A pourover will is so-called because all the estate assets are distributed (poured over)into the revocable trust at death. The pourover will and the revocable trust are designed to work hand-in-glove and can be changed or terminated at any time according to the desires of the maker.

Instead of governing the distribution of all your property, a pourover will simply states that any assets that have not been funded into your revocable trust during life, such as personal property, will go into the trust when you die. Effectively, your revocable trust is named as ​beneficiary of any property the trust does not already hold and that does not pass directly to a living beneficiary through some other means, such as a ​beneficiary designation on a life insurance policy or a retirement account. For a blended family, the revocable trust will spell out who gets what. But, its greatest value is that it can continue after death, providing for the surviving spouse and children over time.

A few excellent revocable trusts solutions available to solve common estate planning problems include:

  1. Asset allocations to underage or unpredictable children can be held by the trustee for legitimate needs (e.g., education and health) or until the child reaches a desired age.
  2. The maker spouse can provide that the surviving spouse have use of the assets during lifetime, and then distribute them to the children. Alternatively, the trust could provide financial support for the spouse and still make sure something is left for the children.
  3. A pourover will can provide for the pouring of assets into two separate trusts— one for children from a previous marriage and one for the spouse or children from a current marriage.
  4. Because revocable trusts avoid probate in most states, beneficiaries may receive assets quickly and without paying unnecessary fees.

Likely, many couples will dread jointly planning how to leave assets to themselves and their children. But, the act of planning together and then putting it all in writing is essential. Even if you and your partner can’t agree on all aspects of the planning, you must spell out every detail in your documents to avoid potential legal disputes

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Liberty Street Advisory Group refers to the separate entities, Liberty Street Law, Liberty Street Capital and Trust & Estate Stewards. None of these entities or persons furnish actuarial, accounting or comprehensive tax advice. Liberty Street Law is a law firm, and does not provide investment management, or any financially-related services. Liberty Street Capital, is a limited liability company registered as an investment advisor in Georgia and other locations. Trust & Estate Stewards is a limited liability company. Past results are not a guarantee of future performance.