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Proper Planning for Blended Families

Since the enactment of the American Taxpayer Relief Act of 2012, many media outlets have reported on the lack of necessity of an estate plan incorporating an “A B” split for married couples.  I have seen articles promoting the use of a disclaimer trust which allows the surviving spouse to decide whether or not to fund a “B” trust as well as articles stating that there is no longer a need for anyone to have a “B” trust.  If the only reason a “B” trust (also called a decedent’s trust or, in our firm’s case, the Family Trust) was used was to maximize the estate tax exemption, I would agree with these articles.  Most are focused on the portability of the estate tax exemption (which allows the surviving spouse to utilize the unused portion of the deceased spouse’s estate tax exemption) and fail to consider other issues.

There are numerous reasons for utilizing the A B split other than for estate tax planning purposes.  Some of the more common reasons include state estate tax minimization, asset protection, long term care spend down protection, generation skipping tax planning, as well as many others.  One prevalent reason for utilizing the A B split and fully funding a Family Trust is to protect blended family interests.

In my practice, I see many clients who have blended families.  In these cases, one or both of the married couple have children from a previous relationship.  While the married couple wants to provide for each other during their lifetimes, they also want to provide for their separate children in the event there are assets remaining at the death of the surviving spouse.  In these cases, an A B split provides a great solution to the problem.  The B Trust can be set up to provide the surviving spouse with income and principle for the surviving spouse’s health, education, maintenance, and support.  The B Trust would then dictate where the assets are distributed upon the surviving spouse’s death.  The B Trust provides protection in that it is an irrevocable trust.  It can be written to state that the surviving spouse does not have the authority to change the death beneficiaries, i.e. the surviving spouse cannot disinherit their deceased spouse’s children and grandchildren.

If a married couple does not use an A B Trust, and all the assets remain in a revocable trust, the surviving spouse has the authority to change the beneficiaries to whomever they so choose.  They have the right to leave the entire estate to their own separate children and exclude the separate children of the deceased spouse.  If a disclaimer trust is used, a surviving spouse may choose not to fund a B trust so that all the assets remain in a revocable trust which the surviving spouse retains the right to alter.  Again, this allows the surviving spouse to change the beneficiaries of the trust to the surviving spouse’s children and exclude the deceased spouse’s children.

For more information or to schedule your free consultation contact us today at 888.222.1328.


Why Choose Morris Hall:
You have a number of options when it comes to estate planning, so why pick Morris Hall?  First off, estate planning and asset protection are a very complicated endeavor and you should only trust someone who focuses exclusively on those matters.  Also, MH is a proud member of The American Academy of Estate Planning Attorneys (AAEPA) which provides us additional support, advanced training, tools and information that is not available to others – which means that we can better protect your assets and your loved ones.  We are one of only two firms in Arizona that belong to the AAEPA and are the only firm in New Mexico that has been granted membership.  If you have assets and loved ones that you want to protect, you are in good hands with MH.  Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.

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