Question: What are some of the concerns of blended families in second marriages?
Answer: The concern and potential conflict in planning occurs in those situations where the spouse with children from a prior marriage has entered into a second or subsequent marriage. The dilemma arises out of the client’s desire to provide for the current spouse and yet not disinherit the children from the prior marriage.
One goal that we try to achieve is to provide sufficient income and access to principal for the surviving spouse so that the spouse can live comfortably. The income could be provided through a trust established for the spouse.
One issue to keep in mind for larger estates is that as a result of the unlimited marital deduction, the surviving spouse is typically not subject to tax at the first death, but assets left to other beneficiaries could be subject to estate taxes. So from an estate tax perspective, a goal might be to transfer assets that would be excluded from the deceased spouse’s gross estate for tax purposes to beneficiaries who would otherwise be taxed (e.g., children) and pass taxable assets to a spouse.
Comment: Children from a different marriage may review each expenditure passing to the surviving spouse as a reduction of their eventual inheritance. The ongoing scrutiny of assets in the control of a surviving spouse can foster resentment and ill will towards that spouse. A better plan may be to separate the assets, leaving a portion of the estate to children and a portion to a surviving spouse, in trust or outright.
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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