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How Trusts Keep Wealth and Property within Families and Passed to Rightful Heirs


In the first two Remarriage and Estate Planning Blog articles, we introduced you to Jane and her three biological children, Joe, Mary and Tony. Jane’s father, the children’s grandfather, left Jane a considerable inheritance. When Jane and the children’s father divorced, and Jane remarried Harry, who also had three children, we began to dissect the potential for Joe, Mary and Tony to be unintentionally disinherited if Jane predeceased Harry. Within certain circumstances, we saw that Jane’s family wealth could evaporate, leaving her children cut off from their grandfather’s estate, and the monies into the hands of another, unrelated family – to Harry and his children, and unfortunately, possibly to Harry’s creditors.

The good news is that this sad situation does not need to happen. Proper and professional estate planning can protect Jane’s family and ensure that her inheritance is eventually distributed to her three children, and then on to their children, if appropriate. It is very important for Jane to seek the advice of an experienced estate planning attorney to ensure her wishes are made clear in her estate plan.

What will Jane’s estate plan look like? It will be a trust-based plan, that is, one that allow Jane’s wealth/property to be transferred into a revocable living trust during Jane’s lifetime. This trust will allow Jane to maintain control of her wealth and to specify exactly how and when the assets pass to the beneficiaries, her children. Jane will be able to set up this legal arrangement so that the trust assets remain accessible to her during her lifetime while designating to whom the remaining assets will pass thereafter, especially given her complex situation such as a second marriage and children from more than one marriage.

Jane can even establish a spousal support trust to care for Harry if she predeceases him. Her trust can include the creation of a Qualified Terminable Interest Property (QTIP) trust to provide income for Harry. Upon Harry’s death, the QTIP assets then will go to Jane’s named beneficiaries including her three children. Jane can even leave money to Harry’s children if she wishes, but in a size and manner of her choosing. With a plan like this in place, Jane has maintained control of her inheritance, her father’s legacy has been passed on to his grandchildren and their children, and the family money has stayed in the family. One might argue that it is Jane’s obligation to fulfill her father’s wishes and that creating her own intentional and thoughtful estate plan does just that.

There is additional good news resonating from Jane’s estate planning. Since trusts usually avoid probate court proceedings, her beneficiaries may gain access to these assets more quickly than they might if her assets were transferred using a will. Additionally, there are potential tax advantages which could be written into Jane’s trust document, allowing her children and heirs to reduce or delay payment of any estate tax that Jane’s estate might owe.

Setting up a trust can provide peace of mind knowing that the care you have provided the people and possessions you love will continue. Knowing which type of trust is best suited for your needs and how to begin can be overwhelming, which is why we wanted to share some foundational knowledge to help you in your financial and estate planning journey. Let us know how we can be of service!

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