Today, the divorce rate is around 40 to 50 percent and always changing. This has led to a change in the typical modern family. Second marriages create what many call a “blended family.” This is where a couple comes together, each with children from previous relations, and gets married, combining their families. In these situations, estate planning becomes increasingly important and tricky. That is why careful thought and planning must go into every step along the way.
Communication
One way that you can ease the estate planning process is by communicating with your spouse and your family relations. Take time to think and reflect about what you would like to happen to your assets, then discuss it with your new spouse. Each of you should share your financial status, future goals, and where you expect your assets to be distributed. These conversations can be emotional and demanding, but they are extremely important. Communication is the key to avoiding future conflicts.
Revocable Living Trust
The most basic, and sometimes the most important, part of estate planning is a valid will. A couple entering into their second marriage should at the very least have a will that specifically addresses their children from previous marriages. In many cases though, a will can be insufficient to accomplish all that you want done with your estate. The best solution to this is to set up an additional document, a revocable living trust.
A revocable living trust partially replaces a will. It allows you to transfer assets into the trust’s name. These assets may include your house, bank accounts, or stocks but it cannot include any insurance policies or retirement funds. These assets will be managed by a trustee upon your death, someone you choose and have confidence in. While your spouse may seem like the perfect “go-to” trustee, many experts recommend that you choose a neutral trustee, since a spouse and children can often have conflicting goals. In blended families, this is the best way to ensure that your children from previous marriages are provided for.
Beneficiary Forms
One of the limits of a revocable living trust is that it cannot be used to distribute your insurance policies and retirement funds. These are designated through beneficiary forms. In second marriages, it is important that you review the beneficiary designations you have made on your insurance policies and any retirement funds.
Many people skip this step and make the mistake of leaving a former spouse as a beneficiary. This causes complications after your death. In order to prevent these problems, make sure your beneficiary forms are up to date with your current wishes.
Also, keep in mind that minors are not legally able to control assets. If you do name a minor as a beneficiary, the court may have to appoint a guardian to manage the assets until he or she turns 18.
Insurance policies and retirement accounts can be a great way to provide for your spouse or your children upon your death. The trick is to make sure that the accounts will be given to the correct people. This is all done through beneficiary forms, not a will.
Call Arizona Estate Attorney Dave Weed at (480)467-4325 to discuss your case today.