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  • Writer's pictureKristyn Carmichael

The Importance of Estate Planning for Married, Divorced, and Blended Families

As an estate planning attorney, I love getting the opportunity to educate people about things that can significantly improve their lives. I am thrilled to be able to collaborate with Kristyn Carmichael this week to talk about estate planning - an important topic for families that are getting married, divorced, or re-married.

Estate Planning is an important, ongoing process of making arrangements for what happens to you and your assets if you become incapacitated or pass away. The process of estate planning answers important questions like:

  1. What will happen to all your assets if you pass away?

  2. Who will make medical decisions for you if you cannot?

  3. Who will raise your children if you cannot?

  4. How will your legacy be carried out after you pass away?

A good estate plan gives you a say in answering all these important questions rather than assuming what you would want according to State Law. These questions are especially important to answer when you get married, divorced, or re-married.

To help illustrate the importance of these questions, I am going to use everyone’s new favorite celebrity couple: music superstar, Taylor Swift and Kansas City tight end, Travis Kelce. For this article, let’s assume that they are not insanely wealthy and that they are a typical, down-to-earth couple.

Hypothetically, things go particularly well in their relationship and Travis and Taylor decide to get married. In first marriages, when it comes to distributing assets, a couple generally has identical goals for their estate planning: take care of the surviving spouse for as long as he or she lives, then distribute what’s left to their children.

In this situation- Travis and Taylor can set up a Joint Revocable Living Trust plan.

In that plan…

  • Travis and Taylor can designate that they want all their shared assets to go to the surviving spouse if one of them passes away. Then, if they both pass away, everything goes equally to their children.

  • They can name each other as their medical agents so that they can make medical decisions for each other.

  • They can make it so that Travis’s brother, Jason Kelce, and his wife, Kylie, should be the guardians of their children if something happens to them.

  • They can also arrange that if they passed away, Jason would oversee their children’s inheritance until they turn 25.

Then, a few years down the road, after Travis and Taylor have a couple of children, they have a falling out and decide to get divorced. Now, their goals and important considerations have changed significantly. Travis and Taylor can update their Joint Plan to be Separate Revocable Living Trust Plans.

  • After the divorce proceedings, Travis and Taylor revoke the Joint Revocable Living Trust. Instead of joint property, they now have their own sole and separate property. They can designate that their separate property goes to their children, equally.

  • They can each name new people that they trust as medical agents.

  • Although there is likely a new custody agreement in place, they can still both name guardians, just in case something were to happen to both Travis and Taylor.

  • They can also now name separate people to manage their children’s money if Travis and Taylor were to pass away.

Then, a few years after the divorce, Taylor meets Justin, who has three children of his own before meeting Taylor. After a few years of dating, they decide to get married.

Goals in second marriages are different than the first marriage. The blended family – his children, her children, and sometimes their children as well – makes for more complicated planning. Each spouse may have separate assets as well as joint, community assets. Often, they want at least some of their assets to go to their own children after they die. At the same time, they want to make sure the surviving spouse has enough to live comfortably. With a blended family, a couple has to put a plan in place if they want to be sure their goals are met. This will not happen automatically.

If Justin and Taylor are creating their estate plan, there are some important questions for them to consider:

  • What happens if Taylor and Justin do not have a Will or Trust and own all their assets jointly?

    • If Taylor is the first to die, Justin will get all their joint assets.

      • Then if Justin also dies, without a will or trust, state law steps in. Arizona law says that Justin’s children get all the joint assets. That means that Taylor’s children are left out.

      • If Taylor and Justin’s plan was to divide everything between all their kids, the failure to plan made sure that didn’t happen.

Taylor and Justin may want to be sure that they are well cared for if one of them passes away, but they also want to be sure their own kids share in what’s left after they are both gone.

  • How can Taylor’s and Justin’s goals be accomplished through a Trust plan?

    • The Trust can provide that some of their assets are protected in an irrevocable Trust that cannot be changed when the first spouse passes away.

      • If Justin dies first, a portion of the assets can go into a separate Trust for Taylor’s benefit that cannot be changed.

    • When the second spouse passes away, the assets in the irrevocable Trust go to the children of the spouse who died first. This way, the first spouse to die is assured that some of the assets will be distributed to his or her children when the second passes.

      • If Taylor dies after Justin, the portion in her separate, irrevocable Trust can be distributed to Justin’s kids. This ensures that Justin’s kids will get a portion of the assets, and everything will not only go to Taylor’s kids.

There are many factors going into estate planning for the blended family. However, most couples have one common goal: doing the right thing for everyone involved: themselves, their spouse, their children, and their spouse’s children. A good estate planning attorney can help put together a plan that accomplishes your goals.

If you would like our help, call us at (602) 375-6752 to set up a free, initial consultation.

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