The Blended Family and Issues with Finances and Estate Planning

Blended families present unique issues in finances and estate planning, but an open conversation about money, your goals and your estate plan can help.

The blended family is a family dynamic that is increasingly common, which can make addressing financial issues much more of a challenge. In a blended family, one or both spouses have at least one child from a previous marriage or relationship, and together they create what’s known as a new combined family.

CNBC’s recent article, “4 ways to help blended families navigate finances,” reports that a staggering 63% of women who remarry come into blended families, with 50% of those involving stepchildren who live with the new couple, according to the National Center for Family & Marriage Research.

The issues in a blended family can be demanding, so couples often delay having the “money talk.” This is an important piece of the family financial puzzle. We’ll look at some of the ways you can work on that puzzle, and see our website for more https://galligan-law.com/estate-planning-life-stages/estate-planning-for-blended-families/:

  1. Get expert advice from your Estate Planning Attorney. Talk to an estate planning attorney about the specifics of your blended family situation.  It is important that both spouses discuss how their separate and joint money will be used, both while they are alive and after they pass away.  This includes whether the spouses want to leave their assets for the children from their prior relationships.  It is also important to discuss the role the children will have in your estate plans so that you can avoid disputes between them.
  2. Create a plan for merging relationship and money. Understanding the role money plays in combining two families is critical to the success of a healthy blended household. A basic step may be to draft a detailed plan of how the couple is going to care for one another in their marriage and in their family, in addition to how they will care for one another’s children. Try to determine the ways in which money plays a role in coming together. The more you can communicate and the more that you can exhibit a united front, even from a financial perspective, the stronger a couple will be.  This may include considering either a prenuptial or postnuptial agreement detailing how your assets will come together in the combined family.
  3. Collect documentation and monitor your money. It’s good to understand the work involved with the preparation and paperwork after divorce and remarriage. You’ll have a divorce decree or a domestic partner agreement, as well as instructions on child support and alimony. You also need to keep track of all the different financial accounts.
  4. Discuss your financial issues regularly. Ask about the financial obligations to the ex-spouses. Make sure both spouses understand if there’s child support and/or alimony, as well as responsibility for paying for housing or their utility bills.

Although these issues may be demanding, they can be successfully navigated with frank, open discussion and the advice of trusted advisers.  If you are in a blended family, please contact our office for a consultation on how these issues may be addressed in your estate plan.

Reference: CNBC (November 23, 2019) “4 ways to help blended families navigate finances”

Continue ReadingThe Blended Family and Issues with Finances and Estate Planning

Amending a Trust: What are your Options?

If your trust no longer meets your needs, there are many ways to amend the trust to serve your goals for you and your loved ones.

A son has contacted an elder law estate planning attorney now that mom is in a nursing home and he’s unsure about many of the planning issues, as reported by the Daily Republic. The article, “Amending trust easier if parents can make informed decision,” describes the family’s situation.

The son has numerous valid concerns about paying his parents’ bills, managing their assets and avoiding personal liability if they are sued.  The author addresses these concerns for the son, but I’d like to focus on one point: updating and amending the trust.

All estate plans change over time as an individual’s needs and wishes change.  Sometimes the trust will anticipate these changes, such as naming a successor trustee to take over when the trust creators can no longer make financial decisions.  In the son’s case, that might be enough.  However, if the trust doesn’t address the issue or if the trust makers’ needs and wishes change substantially, it is sometimes necessary to amend a trust.  Sometimes it is good to amend a trust for tax reasons, such as Mary describes here:  https://galligan-law.com/higher-estate-tax-exemption-means-you-could-save-income-taxes-by-updating-your-estate-plan/

If his parents have a revocable or living trust and have the capacity to handle their financial affairs, they can choose to amend the trust themselves.  This is by far the best and cheapest option as the parents can review the trust each year, put their son in charge of their affairs if they wish and make other appropriate changes.  They can do this very easily by either making an amendment or restating the trust.  Restating is amending the trust by rewriting the terms of the trust with the changes without actually creating a new trust.

If his parents do not have the capacity to make financial decisions, that doesn’t mean the son can’t amend the trust.  Often powers of attorney permit an agent to amend a trust if the principal (person who makes the power of attorney) is incapacitated.  Now, the powers of attorney will usually have limitations built in.  For example, they may require the agent to follow the principal’s “testamentary intent.”  This means that the beneficiaries of the estate plan should be generally the same.  So, if the son wasn’t a beneficiary of the trust, he can’t make himself one now. He also still needs to act in the best interest of the principal.  But, amending the trust to protect the assets and better care for his parents is just fine.

Let’s say the trust is an irrevocable trust, or perhaps the power of attorney doesn’t permit amending the trust, what then?   There are still options.

Some trusts include “trust protectors.”  This is a person named in the trust who can amend the trust in limited ways to make sure it still works.  A trust protector is usually a trusted individual, occasionally an attorney, who can make amendments to the trust.  Depending on the reason for the change, it is also possible to ask a Court to modify the trust.   It’s even possible sometimes to “decant” a trust.  Decanting is not really amending a trust, it is creating a whole new trust with new terms, and then transferring the assets from the old trust to the new one.  These techniques are more complex and expensive, but very helpful, especially with very out-of-date trusts that haven’t been reviewed or amended in some time.

The key point is that is important to review and keep your trust up to date.  But, even if you have a trust that is old or doesn’t work well, there are many ways to amend a trust to ensure proper administration of the assets for you and your beneficiaries.

Reference: Daily Republic (Aug. 10, 2019) “Amending trust easier if parents can make informed decision”

Continue ReadingAmending a Trust: What are your Options?

Estate Planning When Faced with a Serious Illness

More young and middle-aged workers find themselves in the role of family caregiver.
Everyone needs estate planning documents, but a serious illness makes that need more urgent. 

More than 130 million Americans are living with chronic illness. Forbes’ recent article, “Estate Planning Musts When You Or A Or A Loved One Has A Chronic Illness,” says that if you (or a loved one) are living with a chronic illness, you’ll likely need the same estate planning documents most people should have.

The article discusses these key estate planning documents, along with some suggestions that might help you customize them to your unique challenges because of chronic illness. These documents need to be tailored to your specific needs, so you should consult your estate planning and elder law attorney about what works best for you.  It’s also best to put your estate planning documents in place soon after your diagnosis, so that you can return your focus to your health, family and well-being.

HIPAA Release. The Health Insurance Portability and Accountability Act of 1996 governs the requirements for maintaining the confidentiality of protected or personal health information (PHI). A HIPAA Release lets someone you trust access your protected health information.  This is an important estate planning document because it provides your decision makers with information about your condition so they can best serve your needs.

Living Will. This is a statement of your health care wishes and can address end of life decisions, as well as many other matters. If you’re living with a chronic illness, there are special considerations you might want to make in having a living will prepared. For example, you might explain your specific disease while continuing to address other health issues.  You can address the disease you have, at what stage and with what anticipated disease course, and how if at all these matters should be reflected. It is also critically important to discuss these wishes with your loved ones before the issue arises so they understand what you want.

Medical Power of Attorney. This is sometimes known as a medical proxy. It is an estate planning document in which you designate a trusted person to make medical decisions for you if you’re unable to do so. You can give guidance to your medical agent about your preferences, goals and concerns in your medical care.

Financial Power of Attorney. This estate planning document lets you designate a trusted person to handle your legal, tax, and financial matters if you can’t or if it becomes difficult to do so. There are some unique considerations for those living with chronic illnesses to consider. One is the amount of control that should be given up now or at what stage. Another key issue in a power of attorney is if you should sign a special power that restricts the agent’s authority to certain specified items or sign a general power that provides broad and almost unlimited powers to the agent.  It is especially importantly that your power of attorney include authority to handle Medicaid and other long term care benefits if you are facing a serious illness.

Appointment for the Disposition of Remains.  This is a basic estate planning document by which you choose a person to execute your burial wishes and let them know what those wishes are.

Declaration of Guardians.  This is an estate planning document in which you name a person to serve as a court appointed guardian should you need one.  If you have the other documents in place you’ll likely never need this, but it is important to have as a safety net naming someone you trust to be guardian instead of a court appointed agency or lawyer if the need ever arises.

Will and Revocable Trust. Finally, Wills and  Revocable Trusts are estate planning documents which control the flow of assets at your passing.  You should speak with your attorney about which is right for you, but if you or a family member has a chronic illness, using a revocable trust may be a good way to provide for succession of your financial management.  A revocable trust allows the successor trustee to act quickly to manage the finances if you cannot do so yourself and under the guidelines you create.  This way, the trustee can pay for the care you need.

Everyone should have these estate planning documents as part of a well-crafted legacy plan, but if you or a loved one is facing a serious or chronic illness, you may be facing additional challenges that make this planning more critical.

Reference: Forbes (July 5, 2019) “Estate Planning Musts When You Or A Or A Loved One Has A Chronic Illness”

Continue ReadingEstate Planning When Faced with a Serious Illness