I must admit, there are two things that I have a soft spot for as an estate planning attorney:
I think it’s because those people remind me so much of myself.
And this couple was no different.
As always, the names and facts and figures have been changed to protect confidentiality, but when Susie and Fred walked into my door I could tell I was going to be excited to help them.
Here are there basics, broken down:
Estate Planning Goals: keep the businesses running and provide for and protect their children.
The default plan of action in a case like this is to create a plan that includes the basics (will; power of attorney; medical power of attorney; health care directive) but that also includes a revocable living trust that carves out the property of the first spouse to die into an irrevocable trust at the time of death.
The reason for this is very simple: to protect and create a legacy for the children of the deceased spouse.
I think the best way to show how a simple estate plan can have very bad side effects.
Let’s say Fred dies first and leaves everything to Susie in his will. Susie is 100% committed to dividing the assets that exist when she dies amongst ALL of the children in the family.
But then life gets in the way.
Susie is diagnosed with cancer. The medical bills begin to pile up. When she finally passes away there is nothing left for anyone.
Or, in the alternative, let’s say over time Susie finds love again and gets married to Stewie. When they get married Susie and Stewie combine all of their assets. When Susie dies Stewie gets it all, and he doesn’t want to share with Fred’s kids.
Life often gets in the way here, so we try to make sure we’ve planned ahead.
What’s great about a plan like this is that one doesn’t even have to give up a big chunk of the estate to the kids (for all of you out there worried about how the surviving spouse is going to eat if the first to die gives everything to their kids).
A simple (significant if appropriate) life insurance policy can be purchased and fund the trust of the spouse that dies first.
And just like that, all of your problems are solved.
In the end, Fred and Susie decided to stick with the simplest plan: will; power of attorney; health care power of attorney; and health care directive, and build in the trust planning at a later date.
And you know what? That’s better than nothing.
When they were done they’d accomplished about 3/4 of their goals.
Their kids were taken care of with guardianship designations inside of the will.
And the businesses are taken care of if they are ever incapacitated (power of attorney).
At the end of the day, my number one goal is to allow my clients to make an informed decision about their estate plan. In the end, this blended family did just that.