Last time we looked at planning for blended families in general terms. Now let's discuss some specific trusts that you might want to consider for your family.
One such trust, which provides an excellent form of asset protection, is called a Qualified Terminable Interest Property Trust (QTIP). The QTIP trust can generate income for the benefit of the surviving spouse during his or her lifetime. When the surviving spouse passes away, the QTIP's assets can be distributed between mutual and prior children according to the wishes of the previously deceased spouse. In addition, if the children from the previous marriage are young, assets from the QTIP Trust can be held in another trust for the children, under the control of an independent trustee. This can prevent the assets from falling under an ex-spouse's control. If this option sounds right for your family, give Julianna at Santa Barbara Estate Planning & Elder Law a call at (805) 946-1550.
You might also want to consider a Long-Term Discretionary Trust (LTD Trust) to administer your children's inheritance, with a party of your choosing serving as trustee. In this way, even if your children reside with your ex-spouse, your trustee will control the inheritance through the LTD Trust and ensure it is used only for your children. Should one of your children predecease your ex-spouse, the inheritance would remain in your LTD Trust for your grandchildren and, if there are none, for your surviving children or other beneficiaries of your own selection. An LTD Trust can also protect your children's inheritance from their own poor decisions. For example, through Spendthrift Provisions contained in your LTD Trust, the inheritance may be protected against the reckless spending of inherited assets, divorces, lawsuits and bankruptcies.
Another tool to consider, one capable of minimizing estate taxes, is an Estate Tax Exemption Trust (ETE Trust). This will shelter the maximum available exemption amount upon your death for the enjoyment of your loved ones, and is often used in conjunction with the QTIP Trust for the benefit of your new spouse.
To learn more about the unique planning problems associated with blended families, and how we can help address your particular concerns and goals, contact Santa Barbara Estate Planning & Elder Law for a consultation at (805) 946-1550.