Remarriage after divorce often results in a blended family. Blending two families into one is rarely easy. Sometimes, the tension created when you blend two families into one continues long after the marriage. The death of one spouse can exacerbate that tension and may even lead to bitter and costly litigation. A well-thought-out estate plan can go a long way toward preventing contentious litigation after your death if you are part of a blended family. The Port St. Lucie trust attorneys at Kulas & Crawford discuss why estate planning for the blended family is important.
Traditional Estate Planning
During your first marriage, you probably created reciprocal estate plans. You left all your assets to your spouse with the understanding that he/she would then pass those assets on down to your children upon death and your spouse did the same. Now that you are remarried, however, that strategy no longer works. The dilemma you now face is that you likely want to provide for your current spouse while still setting aside assets for your children from your first marriage. You could leave everything to your current spouse and trust that he/she will leave those assets to your children upon death. Not only does that require a tremendous amount of trust in your spouse, but it also does not account for a whole host of intervening problems that could deplete the assets you intend to be passed down to your children. Your children could wind up with nothing. Fortunately, there is a way to both provide for your current spouse and protect assets earmarked for your children – by creating a QTIP trust.
Using a QTIP Trust in Your Blended Family Estate Plan
A QTIP trust operates in basically the same way as any other trust with some special terms designed to provide for your spouse while protecting your children’s inheritance. You will need to appoint a Trustee to oversee the trust administration and manage the trust assets. Assets transferred into the QTIP trust are not actually gifted to your current spouse when you die. Instead, your spouse receives income from the trust assets but cannot withdraw the principal from the trust nor can he or she decide on the ultimate disposition of the trust assets. In the case of real property, your surviving spouse may also receive a “life estate” in the property, meaning that he or she may remain in the home until death, but will never own the property outright. When your surviving spouse dies all assets held in the trust are transferred to the intended QTIP trust beneficiaries, typically your children from a previous marriage.
Another advantage of using a QTIP trust is the flexibility it provides with regard to federal gift and estate taxes. The Executor of your estate can put some, or all, designated assets into the trust after your death. Assets that go into the trust are not taxed until the death of the surviving spouse. This can also be beneficial if the tax laws are not favorable at the time of your death. Your Executor must make a QTIP election on the tax return filed after your death and indicate which assets will be transferred into the trust.
Contact Port St. Lucie Trust Attorneys
To learn more, please download our free solid estate plan checklist. If you have additional questions or concerns about estate planning for the blended family, please contact the experienced Port St. Lucie trust attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.