Basic Questions on Trusts and Second Marriages

Written by: Greg Reese, President & CEO, AmeriEstate Legal Plan, Inc.

Questions:

• Are you in a second marriage, did you have children from the first?
• What happens when your spouse has children that you’ve grown fond of?
• How do you treat children from a prior marriage versus the children in a current marriage?

Answers:

• The best solution is creating Trusts which can be established for the benefit of all those you want as beneficiaries.
• Once you have your Trust or Trusts established, you should seriously consider funding them with life insurance.
• In some cases you might even want to provide for a second spouse or prior children with life insurance outside of the Trust to avoid complicated interactions between the prior families as the Trust and outside life insurance can be handled separately.
• This takes away many of the burdens of distributing your estate.

Question: I have a beneficiary with special needs, what should I do?

Answer:

• If you have a beneficiary with special needs, and need to provide for their care, you will want to set up a Special Needs Trust. Often times I work with clients who have children that receive government benefits, and if this child receives an outright inheritance, they will lose their benefits.
• A Special Needs Trust funded with life insurance or other liquid assets can provide the dollars needed for medical equipment, future medical treatment and incidental expenses not covered by the government benefits.

Question: There have been occasions where clients want to leave their beneficiary some inheritance but do not want the heir to receive their share immediately.

Answer:

• Let’s be honest, not every heir is capable of handling any inheritance. Establishing a trust to distribute income to them over a period of time is a much better means of making sure they don’t squander the proceeds.

Without question, clients need to plan for settling their estates regardless of the size. By making those smart decisions today, you can avoid costly expenses and conserve the assets for your loved ones.