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| ESTATE PLANNING |
January
2005, Volume 7 |
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 We
look around us and we see the changing face of America. Americans
are living longer now than ever before. The life expectancy has ratcheted
up gradually from 59.7 years in 1930 to 77.2 years in 2004. This,
combined with an increased rate of divorce, results in more marriages
per individual and more blended families.
Let’s look at a typical situation. Susan and Mike have been
married 5 years. It is the second marriage for each of them and Susan
has two children from the prior marriage. Susan wants to make sure
that Mike is taken care of after she dies. However, she also wants
to make sure that her children are taken care of. How can Susan accomplish
both goals?
Susan could leave everything to Mike and rely on him to take care
of her children. However, Susan fears that Mike may remarry after
her death and may have children with that wife and that her children
may be neglected. Susan could leave the assets in a trust that could
take care of Mike and the kids. The income could be paid to Mike and
he could have the authority to distribute the principal for the needs
of the children. For further protection, Susan could ask a professional
trustee to make those decisions.
Even with a professional trustee, the interests of Mike and the kids
are contrary to each other. As the income beneficiary, Mike would
like the trust invested to maximize the current return. As the remainder
beneficiaries, the kids would like the assets invested for long-term
growth. However, a “total return unitrust” could be used
for Mike and the kids. With this unitrust, Mike’s income interest
is based on the value of the trust each year. For example, it might
pay Mike 4%of the value of the trust annually. This way, Mike and
the kids have their interests aligned regarding how the trust should
be invested.
Blended families face unique challenges. Preserving the relationships
between the step-parent and the step-children after the death of the
parent is one of those challenges. Susan can accomplish her goals
of taking care of both Mike and her children. By utilizing a unitrust
and a professional trustee she can keep her money from being a friction
point betweenike and the kids.
Each blended family has unique circumstances and needs. An attorney
at Sterling & Tucker can help you determine the best way to take
care of and preserve your family.
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