Blog

Legacy Planning Law Group

We're There for Your Family When You Can't Be

How Blended Families Can Address Finances and Inheritance Issues
Blended Families Face Unique Estate Planning Issues

How Blended Families Can Address Finances and Inheritance Issues

The holiday season is a popular time for people to get engaged, including people who have been married before. If that’s you, understand that blending families means you’ll need to deal with inheritance and finance issues, says U.S. News & World Report’s article “6 Financial Considerations for Remarriage.” The best time to have these conversations is before you walk down the aisle, not afterwards.

Look at your budget and talk about how things will work. That includes day-to-day expenses, monthly expenses and large purchases, like houses, vacations and cars. Talk about a game plan for going forward. Will you merge your credit card accounts or bank accounts? What about investment accounts?

Financial obligations outside of the marriage. Two things to check before you wed: your divorce papers and the state’s laws. Does anything change regarding your spousal support (alimony) or child support, if you remarry? It’s unlikely that you would lose child support, but the court may determine it can be reduced. The person who is paying child support or alimony also needs to be transparent about their financial obligations.

Review insurance and beneficiaries. One of the biggest mistakes people in blended families make, is failing to update beneficiaries on numerous accounts. If your divorce papers do not require life insurance to be left for your spouse on behalf of your children (and some do), then you probably want to make your new spouse the beneficiary of life insurance policies. Investment accounts, bank account, and any other assets where a beneficiary can be named should be reviewed and updated. It’s a simple task, but overlooking it creates all kinds of havoc and frustration for survivors.

What will remarriage do to college financing options? A second marriage may increase a parent’s income for college purposes and make children ineligible for college loans or needs-based scholarships. Even if the newly married couple has not blended their finances, FAFSA looks at total household income. Talk about how each member of the couple plans on managing college expenses.

A new estate plan should be addressed, even before the wedding takes place. Remember, an estate plan is for more than distributing assets. It includes planning for incapacity, including Do Not Resuscitate Orders (DNR), powers of attorney for finances and for health care, designations of guardianship or consent to adoption, various trusts and if needed, Special Needs planning.

Create a plan for inheritance. If either spouse in a blended marriage has children from a prior marriage, an estate plan is critical to protect the children’s inheritance. If one spouse dies and the surviving spouse inherits everything, there is no legal requirement for the surviving spouse to pass any of the deceased’s assets to their children. Even if you are in mid-life and death seems far away, you need to take care of this.

Speak with an estate planning attorney who can help you create the necessary documents. You should also talk with your children, at the age appropriate level, about your plans, so they understand that they are being planned for and will be taken care of in the new family.

Blended families in second marriages face unique estate planning issues.

Reference: U.S. News & World Report (Nov. 18, 2019) “6 Financial Considerations for Remarriage”

Should I Use a Bank as My Executor Instead of a Family Member?
A Bank May Be A Good Choice To Be Your Executor

Should I Use a Bank as My Executor Instead of a Family Member?

You can choose anybody you like to be the executor of your will but consider who will do the best job.

Executors are legally responsible for several tasks, including identifying everything in the estate, collecting all the assets and paying the debts and liabilities. Finally, the executor makes distributions to beneficiaries, in accordance with the terms of the will.

nj.com’s recent article on this topic asks “Should I choose a bank to be the executor of my will?” The article explains that there are a few advantages to designating a bank as an executor.

Banks are in the business of managing money and are experienced in administering estates.

This typically means they may be able to settle the estate more quickly and efficiently than a family member.

Banks have policies and procedures in place to make certain that the assets are protected from mismanagement and theft.

Banks are impartial parties that cannot be influenced by beneficiaries. This can be a big headache for a family member asked to be executor. Relationships can deteriorate over the enforcement of the terms of a will, especially when one sibling is named to oversee the estate and has the authority over the administration of the estate—perhaps to the detriment of her brothers and sisters.

One distinction from using a family member is that while an executor is entitled to compensation, family members frequently waive this. However, banks charge fees for serving in this role, and these fees may be higher than you’d expect.

For example, the bank’s fee might be up to 4% of the first $100,000, then decrease incrementally until it’s just 0.5% of values over $9 million.

One other note to keep in mind is that many banks won’t serve as executor, unless the estate is substantial enough to meet the minimum fees charged by the bank to serve as the executor.

Read here what an executor actually does.

Reference: nj.com (November 5, 2019) “Should I choose a bank to be the executor of my will?”

Why is Ashton Kutcher So Stingy with his Kids’ Inheritance?
Some Celebrities Are Stingy With Their Kids' Inheritance

Why is Ashton Kutcher So Stingy with his Kids’ Inheritance?

Ashton Kutcher says he’s not setting up an inheritance trust fund for his kids but instead is planning to educate them on the value of hard work. Ashton Kutcher said, “My kids are living a really privileged life, and they don’t even know it.”

The actor has an estimated net worth of $200 million.

Business Insider’s recent article, “Ashton Kutcher says he’s not setting up a trust fund for his kids, and his parenting approach echoes what billionaires like Warren Buffett and Bill Gates have said,” reports that Kutcher’s parenting approach is similar to other well-known wealthy individuals. Elton John, Sting and Simon Cowell have all revealed they don’t plan to leave their children a lot of money. Instead, they plan to emphasize educating them on the value of hard work.

Likewise, many billionaires aren’t leaving their children much money. For example, Bill Gates has announced that he would leave $10 million to each of his three children. That’s just a fraction of his $108 billion net worth.

In a 2013 Reddit “Ask Me Anything” forum, Gates said: “I definitely think leaving kids massive amounts of inheritance money is not a favor to them. Warren Buffett was part of an article in Fortune talking about this in 1986 before I met him, and it made me think about it and decide he was right.”

Mr. Buffett said he has pledged 100% of his estimated $87.3 billion fortune to various charities. Instead of giving each of his three children inheritances in the millions or billions, he’s promised to give about $2.1 billion of Berkshire Hathaway stock to each of his children’s charities.

Buffett’s decision might arise from his views on dynastic wealth, or the pattern of families passing money down from one generation to the next. Buffet has been vocal about his efforts to decrease the vast wealth sitting in the hands of a few influential people.

“Dynastic wealth, the enemy of a meritocracy, is on the rise,” Buffett said in 2007. “Equality of opportunity has been on the decline.”

Older generations might consider restricting their children’s access to family wealth because of highly visible heirs and so-called trust-fund babies, who show off their wealth on social media. Parents may want to include provisions to ensure that any trust can be modified in the future.

Learn about how to protect a child’s inheritance from divorce or lawsuits.

Reference: Business Insider (November 10, 2019) “Ashton Kutcher says he’s not setting up a trust fund for his kids, and his parenting approach echoes what billionaires like Warren Buffett and Bill Gates have said”