A marital trust, sometimes referred to as an “A” trust, is a unique tool that is particularly helpful for estate planning for blended families.  Remember, a trust is a legal arrangement in which the grantor, the person establishing the trust, transfers ownership of their property or assets to a trustee, who then manages and controls the assets for the benefit of the named beneficiary.  A marital trust is simply used to benefit the surviving spouse of the person who dies.

There are many reasons for creating such a trust– to provide asset protection for the surviving spouse, or to ensure that your children are the ultimate beneficiaries of your estate after your spouse dies. If your spouse remarries after your death, and you leave your entire estate to your surviving spouse, the new spouse could make claims on the inheritance you had left, either in a divorce or by demanding a share at the death of your surviving spouse. If you leave the inheritance to your spouse in a marital trust, the assets would be protected from the claims of a future spouse.

In today’s world, there are many “blended” families, which is a term used for families with stepchildren. In most states, stepchildren have no legal claim to an estate should a stepparent die intestate, meaning without a will.  In blended families, the natural parent of the children often wants to ensure that his or her children ultimately receive the benefit of their wealth. The natural parent can establish a marital trust that provides for all income from the estate to go to the surviving spouse (the stepparent of their children). Then, upon the death of the stepparent, the remaining assets go to the children. In this manner, the surviving spouse is not disinherited and the estate ultimately goes to the children.

Even if your family is not currently a “blended family”, circumstances can change and it is always makes sense to plan for the unexpected and protect your loved ones.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Blended families are a reality in today’s society, and estate planning needs to address the complexities that are faced when families and assets are combined.  There are several techniques that an estate planning attorney can recommend to address the specific issues of blended families.  These estate planning tools include, but are certainly not limited to:

• Qualified Terminable Interest Property Trust:  With this type of trust, assets are held in trust for the use of a spouse, who is entitled to receive income from the trust and make use of any trust assets, including the primary residence. The spouse is also allowed to spend trust principal to the extent that is allowed by the language of the trust. The grantor (the person who established the trust) names beneficiaries who will inherit the trust assets when the surviving spouse dies. For instance, his or her children, who may not be the children of the surviving spouse and would otherwise have no claim to the assets, could be named to receive the assets when both spouses are deceased.
• A two-part estate plan:  An estate plan that accounts not only for benefit of the surviving spouse, but also gives a portion to the children of the deceased spouse, either outright or in a trust that takes advantage of federal estate tax exemptions.
• Lifetime gifts:  Gifts are allowable and tax-free to a certain extent, and you have the added benefit of seeing the beneficiary enjoy the gift while you are alive.   Each year you are able to give away money or property in the form of a gift that is nontaxable as long as it is below the gift tax exclusion amount.  This amount is currently $13,000 if the gift giver is an individual, but for a couple who make gifts, the exclusion amount is $26,000.

These are just a few of the basic strategies for estate planning for blended families.  As you can see, it can become a challenge to plan for potential conflicts, human nature and future needs when blended families are involved, particularly when there are children from previous marriages.  Make sure you consult with an estate planning lawyer with experience in Ohio law and blended families if you are facing this challenge.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.