Benefits of Separate Share Trusts

In the past month and a half I have noticed an increase in prospective clients wanting to know more about protecting assets for a child/beneficiary who has one or combination of the following issues: financial, medical, addiction, or spousal.

When developing an estate plan, it is paramount you understand how distributions work and what that means for your potential beneficiaries.

For example, a married couple has two children. One child is capable of managing their assets, has a job, no financial issues, and supports their family. The other child, however, is an alcoholic or an addict, cannot keep a steady job, and is in financial trouble. The first child would have no issues receiving a sum of money from an estate, whereas, the second child would have some major issues.

For instance, if the second child was an alcoholic and received a sum of $10,000.00, how long would it take the second child to drink up the entire inheritance? Would they survive having that much money to spend on their addiction?

Or what if the second child had a judgment against them or owed creditors money? The inheritance would be gone as soon as they received it in order to settle the debts.

Is that really what the clients would want for their estate? For it to be spent enabling their child’s addiction or to be used completely to pay for creditors? For most, the answer is no. The intention is for any inheritance to be used for the benefit of the child, not to settle debts or feed an addiction.

One prospective client made the comment, “I never expected to have to worry about my adult child inheriting my estate.”

One sure fire way to guarantee an inheritance is used for the benefit of the child/beneficiary is through a separate share trust. A separate share trust can be included in any revocable living trust plan or be drafted into your will.

If the separate share trusts are included in a revocable trust, they come into being after the grantor(s) have passed. Instead of the trust being distributed outright to the named beneficiaries, any designated share would be moved to the specified separate share trust and managed for the beneficiary.

Similarly, a separate trust included in a will comes into existence after the estate and will have been probated. Instead of an heir receiving a distribution, the separate share trusts are created and managed for the beneficiary.

Separate share trusts mean the assets are never transferred into the name of the beneficiary. By the assets remaining in trust, creditors cannot reach the assets to settle the beneficiaries debts. If the beneficiary were to go through a divorce, the inheritance would not be a part of the marital estate. If the beneficiary was struggling with addiction, the separate trust could specify the amount the beneficiary was allowed to receive per month, specify the beneficiary could use any amount necessary for  rehabilitation, specify upon proof of sobriety for a certain period of time would allow an increase in the distribution, etc.

The beauty of a separate share trust is they can be tailored to the specific issues and needs of the beneficiary. Whereas, if the beneficiary were to receive an outright distribution, there is no control over how the inheritance is used.

This is the number one reason why it is important to update your estate plan and talk to an experience estate planning attorney. Life happens. People’s situations change as years go by and it is vital that you make sure your estate plan is equipped to handle the circumstances of your children/beneficiaries.

Separate share trusts are an extremely useful tool to have in your estate planning toolbox. Talk to an estate planning attorney today to learn more about separate share trusts and whether or not they are right for you and your estate.





Blended Families: Simple Wills

Recently, I have had an increase in recently widowed clients of a blended marriage, wanting their estate plans reviewed and updated. The document that dominates the conversation is their Last Will and Testament. Every one of them so far as asked, “Can I change my will and not include my spouse’s children?”

Most married couples have what are referred to as “I love you” wills. Generally, they leave the entire estate to each other, and then to both sets of children from a previous marriage. The wills are executed based upon the idea that, should I die first, my spouse has promised to share my estate with my children.

Ideally, Spouse A dies first. Everything goes to Spouse B. When spouse B dies, everything is split equally between the surviving children of both spouses. The reality is, the surviving spouse has no legal obligation to leave your children anything upon his/her death.

Yes, the wills were executed with the intent the estate would go to both sets of children. But, these promises to give the estate to both sets of children is really more morally binding than legal.

When Spouse A passed away and Spouse B inherited the estate, the estate became wholly Spouse B’s. Once the estate is wholly Spouse B, he/she is free to dispose of their estate in any manner they choose.

So, when these clients ask me the questions “Can I change my will?” I tell them, “Yes you can.” Because legally, YES THEY CAN.

Reason for changing their documents range from “I never see his/her kids”, “They stopped calling and visiting”, etc.

How do I protect against this scenario? How can I ensure my children receive part of my estate if I should pass first?

Simple. A Trust.

A trust developed with specific language addressing can ensure that upon your death, your estate shall go to your children and you spouse cannot change the distributions.

For more information, contact an estate planning attorney today!


Blended Families and Estate Planning 101

The next few posts are going to be dedicated to the topic of “Blended Families and Estate Planning”.  A blended family presents unique challenges in the world of estate planning.

The most common marital status today is neither “married”, “single”, nor “divorced”, it is “Remarried”.  With so many re-marries, there is a higher chance a client is going to be part of a blended family. Blended family meaning each spouse has children from a previous marriage.

Children of a prior marriage can be an integral and loving part of the new family relationship and treated by both spouses as if all are their natural offspring. The challenges that arise in a blended family when trying to establish an estate plan revolves around a conflict of interest in the desire to provide for the other spouse’s children. 

A common and informal way of addressing the issue within the family unit is to exchange oral promises between spouses.  What I see most often is a couple having only simple wills, meaning the estate is left to the survivor of them, and a promise that the surviving spouse would divide the estate equally between the children of both spouses.

These oral promises are often problematic and raise issues as to enforceability. Even with harmonious blended families, lack of planning may lead to unforeseen difficulties.  

 For example, if all assets are left to the new spouse, the prior children may not be provided for as the deceased spouse would have wished. As I the situation stated above, the surviving spouse will inherit all of the estate in accordance with the will. The surviving spouse is now the sole owner of the estate and is not legally obligated to give any share of that estate to the decedent’s spouse children. The oral promises made between spouses, does not have to be honored.

 On the other hand, if arrangements are made so that one spouse leaves assets for children of a prior marriage, therefore bypassing the surviving spouse, there may not be sufficient assets remaining to provide for the surviving spouse.

As long as there is no animosity between the blended families, the thought of one’s children not being provided for, are never considered. The key to estate planning is to prepare for the “what ifs”. It is unclear as to what everyone’s situations will be five, ten, twenty years down the road. For example, a spouse that had every intention of sharing the estate with step-children, could find one of his/her own children desperately needs money. Instead of splitting the estate evenly, he/she leaves it to the struggling child and not to the step-children.

There are several estate planning tools blended families can use to achieve their respective goals. With careful consideration, estate planning for the blended family can provide orderly, equitable and compassionate distribution of estate assets, while also minimizing or eliminating potential animosity between the surviving beneficiaries.

The next series of posts will be dedicated to this topic of blended family planning. If you are part of blended family and are interested in having an estate plan suited for a blended family, contact a local estate planning attorney today.