Recently Remarried? Do You Need A Living Trust?
If you've recently remarried, estate planning isn't likely to be at the forefront of your mind. However, life can be full of unexpected twists and turns, and the last thing you want is for your children to be inadvertently disinherited if something should happen to you before you and your new spouse have had joint wills drafted. Read on to learn more about some situations in which you may want to establish a living trust to protect assets for your spouse and children, as well as when a traditional will may do.
When is a Living Trust Necessary?
Depending on the intestate succession laws in your state, it's possible that if you predecease your spouse when your children are all over age 18, your spouse will receive your entire estate. If your spouse executes a will after your death and leaves these assets to their own children, other relatives, or a charity, your children may be disinherited entirely.
One alternative to this is for you to create a living trust. During your lifetime, you'll place all your assets you'd like to pass on to your children into this trust, but are free to use these assets as you see fit. Upon your death, the living trust will be converted to an irrevocable trust. Your spouse will be able to use income from this trust (depending on the way the trust documents are structured), but cannot remove or spend down principal assets or change the beneficiaries. Upon your spouse's death, your children will become beneficiaries of your trust, and the assets will be distributed to them.
Trusts can be a great way to protect substantial assets from estate taxation and to ensure that your wishes are honored even after your death. But unless you have significant assets or are concerned about one or more children inheriting a lump sum (in lieu of receiving smaller periodic payments from a trustee), there may be a more appropriate choice.
When is a Will a Better Alternative?
A will simply memorializes your wishes as to how you'd like your estate divided after your death. Many spouses execute joint wills, which contain essentially identical provisions that ensure assets will pass the same way regardless of which spouse predeceases the other.
But because your spouse has the ability to change their will after your death, relying on your spouse to avoid disinheriting your children may not be the wisest approach. Instead, you may want to leave your children a bequest in your will so that they receive certain assets upon your death instead of later.
Contact a business like Rudolph and Chonoles LLP for more information.