ESTATE PLANNING FOR COUPLES WITH CHILDREN FROM PRIOR MARRIAGES July 18 2019

here

ESTATE PLANNING FOR COUPLES WITH CHILDREN FROM PRIOR MARRIAGES July 18 2019

ESTATE PLANNING FOR COUPLES WITH CHILDREN FROM PRIOR MARRIAGES

Senior Connection

July 18, 2019

  1. Common Estate Planning Issues for Couples with Blended Families\
    • Children don’t like or get along with the new spouse
    • New spouse’s relationship with stepchildren may be strong while their spouse is alive and fade after the spouse dies
  2. Use of Bypass Trusts
    • A marital trust that splits into two trusts, a Decedent’s Trust and a Survivor’s Trust, upon the death of the first spouse to die.
      • A-B trusts are generally used when one or both spouses has/have children from previous marriages, and/or to minimize estate taxes.
      • The Decedent’s Trust contains the separate property of the first spouse to die and the decedent’s half of the community property or the amount of those assets in excess of the estate tax exclusion amount.
      • The Survivor’s Trust contains the separate property of the surviving spouse and the surviving spouse’s half of the community property.
  3. Separate property: real and personal property that is owned by a spouse before marriage or is acquired by that spouse during the marriage by gift or inheritance, and any income or increase in value on such property.
  4. Community property: all property acquired by either spouse during the marriage, except property acquired by gift or inheritance.
    • Protects the testamentary intentions of the decedent;
    • Provides some creditor protection to the surviving spouse;
    • Growth on the Decedent’s Trust is sheltered from estate tax;
  5. Decedent’s generation skipping tax exemption can be applied to the Decedent’s Trust assets.
    • Downside to the split:
      • Split trust requires more administration. Community real property that is owned by the trust will need to be distributed to the Decedent’s Trust and the Survivor’s Trust in equal shares using a deed of distribution.
      • Decedent’s Trust assets do not get a step-up in tax basis at the surviving spouse’s death;
      • Undistributed income is taxed at the compressed trust tax rates.

Want To know More?

To continue reading please -

0

About Admin

    You May Also Like