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Estate Planning for Blended Families: A Case Study

 

If you are remarried and both have families from a previous marriage, what does the estate plan look like?

Estate planning for blended families is always difficult because of what you come into the family with and what you accumulate together and how you intend to protect each other in case of premature death.

There are two important questions for a blended family:

  1. How are you going to divide up the assets at either death?
  2. Is ownership prior to the marriage important to you?

I have one such case that had multiple issues. One of those issues was how to give to two kids from his first marriage and two kids from his second marriage and the two kids that she brought in from her first marriage. It was also a challenge because the ages of the children ranged from 16 to 50! In this case, most of the wealth was his, and he did not want to favor his children over hers.

The first step to estate planning that helps focus the plan and create a God-centered approach is an Estate Planning Vision Statement along with multiple objectives for planning.

Their plan focused on three main objectives:

  1. Support all of the children’s education needs as well as grandkids that currently existed and planned for the grandkids that might appear in the next twenty years. He stated that he wanted them to have private education from kindergarten through high school.
  2. Provide a down payment on the first home up to $250,000.
  3. Provide $1 million for retirement at age 50.

After creating a spreadsheet for the education costs, we discovered that he would deplete his net worth by supporting all that he wanted to do for their education. So we revised the plan so that he would support their higher education needs first and only give based on how well they did in the classroom.

Once we had determined realistic objectives, we created a strategy that worked to reduce his taxes by 70% and increase his giving twenty-fold. So the objectives were merely constraints for the strategies.

One such strategy was to take the money that he was going to give to the younger kids and place it in a corpus trust and pay the income to charity. The trusted lasted until each child reached 50. As a result, of the number of years that he gave the income to charity, most of the corpus was free from gift taxes.

This case took a year and a half to plan, but the results were well worth the time and effort as recorded in the video above.

 

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Joe SturnioloBy Joe Sturniolo
Christian Family Legacy and Wealth Planning

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