Parents with blended families face some specific challenges when they create or update their estate plans. Since they are often older, there is a higher likelihood that one or both spouses have certain assets that explicitly need to go to one set of children, such as a vacation property that goes back generations on one side of the family. There also may be concerns that a surviving spouse will redirect the entire estate to just their children. Or, perhaps worse, the surviving spouse may remarry and subsequently enable that spouse to gain control of the estate.
A-B Trusts often used
Estate planners will often recommend a revocable A-B trust. The living trust often works for some larger estates because it has different contingencies, depending upon which spouse passes first. While each trust is unique to the people who create it, the A-B Trust has certain protocols:
- Trust A holds the survivor’s individual assets as well as half the marital or community property.
- Trust B holds the decedent’s individual assets as well as half the shared property.
Generally speaking, the surviving spouse, family member or professional is the trustee for both A and B trusts. The surviving spouse or trustee is able to change the A trust, but the B trust shifts the sum of money equal to the estate tax exemption in the year that they die and put it into an irrevocable trust, which means that surviving spouse will have limited control. As with other trusts, this arrangement helps to minimize tax obligations.
It can minimize family disputes
Parents who end up with children and/or stepchildren often work hard to keep this complex family structure as harmonious as possible. It may end up so, but the loss of a parent in any family can throw the family dynamic into flux or leave children feeling isolated or worse.
The A-B Trust helps to ensure that their assets go the decedent intended. A well-planned estate with an A-B Trust or other arrangements can also reduce the level of stress placed upon children and beneficiaries as they grieve their loss. A knowledgeable estate law attorney can help a client set up an A-B Trust or draft another arrangement that best addresses the family’s specific needs.