Fact of life: families change—and so do the needs of the individuals in them. Accordingly, financial plans, accounts, documents, named beneficiaries and appointed fiduciaries must be reviewed and adjusted periodically in order to keep up with the shifts In other words: complex families will want to be especially vigilant with their estate plans.
Relationship Webs: What If…
As estate planning experts at Leigh Hilton remind us, the absence of updated estate plans can leave families in chaos and conflict, and ultimately result in the application of the state laws of intestacy to determine the distribution of assets. What if life events and illnesses catch us before we have updated the beneficiaries on our life insurance policies or retirement plans? What if that health proxy we have been meaning to update still lists the ex-spouse instead of the current partner? What if the will was never updated to include a “bonus” baby? It is especially important to avoid estate planning slip-ups when families include:
Existing children from the previous marriage
New children from the current marriage
Minor children from current or previous marriage
Beneficiaries with special needs
Adopted children and grandchildren
New spouses
Former spouses (in case of divorce)
Stepchildren
Creating a valid will is a good foundational step for every adult, and attorneys point out doing so is especially important when families are blended. Ideally, a more fulsome, plan, tailored to the specifics of the family, is also developed in consultation with estate planners, who remind us:
Life happens, and so do death and divorce. Remarriage may result in cordial but often not close step-relations. While you may think everything is great now, too many blended families thrown together by remarriage merely tolerate each other until the biological parent dies or becomes disabled. From there, a litany of potential problems can arise.
For example, if the spouse who has the majority of assets dies first, whose interest is primary? Will it be the surviving spouse or the children? If a parent is not careful, his or her children may be unintentionally disinherited. If the children are protected, the surviving spouse may be disinherited. What is a person to do? The best way to have a smooth transition upon disability or death is to create a comprehensive strategy before you cannot execute the papers. Estate planning for blended families would include a prenuptial agreement along with a fully funded, revocable living trust.
Revocable Living Trusts Explained
Just as the name implies, a revocable living trust is a great estate planning tool because it can be easily updated as life or assets change. Wilson Law Group explains: “A revocable living trust contains money and property that you transfer into it, and you choose a person (the trustee) to manage it for your benefit while you are still alive. You can set up a living trust in such a way that it can be changed or revoked except when you do not have the mental ability to do so or have passed away. A living trust can also specify the distribution of the money and property when you die.”
Whenever a trust is created, it is important to carefully designate the trustee, based on a solid understanding of the essential duties of trustees. Ultimately, whether a professional, friend, or relation is selected, the trustee has a fiduciary obligation to the beneficiaries—and must always exercise reasonable care and skill in managing the assets of the trust. Accordingly, the trust agreement often requires a trustee bond, which is a specific type of fiduciary bond that protects the interests of the trust and its beneficiaries in accordance with applicable state law. As a leading national provider of many types of fiduciary bonds, Colonial Surety makes it easy and efficient to obtain a trustee bond. Just get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.
Keep Trusts Up To Date
Because they can be customized based on circumstances and personal preferences, trusts are very handy in estate planning. Nonetheless, they need to be kept up to date. The estate planning experts at Frank & Kraft suggest that trusts should generally be reviewed every 3-5 years as a matter of routine. Life changes, including marriage and , divorce are examples of junctures when it is especially important to review the terms of a trust. For example, keep in mind that when adult children marry, sons and daughters in-law may have “a potential legal interest in any assets that are to be distributed to your child according to the terms of the trust….” Another important time to update trust agreements is when there are new births or adoptions.
Experts point out that it is best to specifically add the names of newborns into a trust agreement “even if you already have a general provision directing distributions to children or grandchildren.” Additionally, estate lawyers remind us that when children become adults, some of the provisions in the trust may need to be reviewed if the intention is “to gift directly to them.” More estate planning ideas are available right here and estate bonds are available right here.
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