Michael Ettinger Attorney at Law
My husband and I are on our second marriage of twenty-four years. We both have children from our previous marriages. How do we take care of each other, but ensure assets are split fairly after the second of us passes?
As the old song goes, even though love may be better the second time around, it is often more complicated. Too many couples, for lack of something better, end up with the “last to die wins” plan. If he dies first, it all goes to her, when she dies it all goes to her children, and vice versa.Instead, a trust is an excellent vehicle to solve this second marriage conundrum. Trusts were invented to separate the “ownership” of an asset from the “use of enjoyment” of it. Wife and husband may put their assets in a trust and name themselves as co-trustees to manage the trust. They may buy, sell, trade and spend exactly the same as before. The trust may then provide that the survivor of them has the use and enjoyment of the assets, but on the second death these assets are split between the respective families as the couple agrees.
The fly in the ointment is who should be trustee, or manager, after the first spouse dies. If it is the surviving spouse alone, he or she may take all the assets out of the trust and defeat the plan. Nevertheless, many spouses are completely comfortable taking on this risk and prefer having their partner alone in charge if they predecease. On the other hand, the first to die spouse may be concerned about a remarriage, or a cognitive impairment, upsetting the apple cart and decide they would like a co-trustee involved to protect their children's ultimate distributive share.
Who should the co-trustee be? If it is one of the surviving spouse's children, it may be like having the wolf watching the chicken coop. If one of the deceased spouse' s children they have a conflict, whatever they spend on the surviving spouse comes out of their inheritance. Besides, the family glue can come undone fairly quickly after the first spouse dies. The relationship with the deceased spouse's children may not be what it once was.
A trusted professional, preferably not a financial advisor who also has a conflict, may serve as co-trustee. Either the family accountant or the estate planning lawyer serves well for this purpose. The surviving spouse still has the use and enjoyment of the assets but the co-trustee prevents him or her from “raiding” the trust or changing the plan.
A well crafted plan makes sure the children of the surviving spouse feel secure that their share of the estate is protected. Moreover, having a plan in place may go a long way towards keeping harmony in the blended family for years to come.