When two people with children from prior marriages or relationships get married to each other, many issues may arise that require care and clear attention. One topic remarrying partners should address early on is estate planning.
One person may need to keep a former spouse named as the beneficiary on a life insurance policy per their divorce decree. Another spouse may have years left to pay child or spousal support. Both may want to take care of each other should they die first, yet they may still want to leave a legacy for their children and grandchildren.
Blended families and wills
As explained by Forbes, leaving estate planning to a simple will for a blended family may fail to provide the structure necessary for the deceased person’s wishes to come to fruition. When the surviving spouse inherits all assets, that person may or may not pass anything on to the first spouse’s biological children. Estate taxes may also eat up a sizeable portion of the first spouse’s estate.
The qualified terminable interest trust
According to Policy Genius, a qualified terminable interest trust may offer a remarried couple multiple benefits when it comes to estate planning. Simply put, a QTIP trust allows one spouse to title assets into the trust. Upon their death, the surviving spouse enjoys a marital deduction eliminating their need to pay any estate taxes at that time.
Via a QTIP trust, a surviving spouse receives income from the trust assets for the duration of their life while the assets themselves remain intact. When the surviving spouse dies, the trust assets flow to beneficiaries as named by the first spouse.