How to pass down separately held property to children from a prior marriage without impoverishing your spouse.
As second marriages and blended families become the norm, many couples, particularly those who are married later in life, are recognizing the need to preserve their individual estates for their own children. Such was the case of Joe and Mary Smith (names changed to protect their privacy) who recently established mirror revocable trust with Northwest Trustee & Management Services.
At the time of their marriage, Joe and Mary each owned real estate and other assets. In the state of Washington, these assets are considered to be separate property. After almost two decades of marriage, the Smiths accumulated a substantial amount of community property. To further complicate matters, Joe and Mary each had adult children and grandchildren by prior marriages.
Mary’s attorney referred her to Northwest Trustee & Management Services upon recognizing the Smiths’ need for estate planning and management. After several meetings, the Smiths’ personal goals were clarified:
Segregate their assets so their children by prior marriages will inherit only their parent’s share of the estate.
Make their individual estates available to care for their surviving spouse.
Protect themselves in the event of incapacity.
Maintain a measure of control over their assets as long as they are capable to do so.
The Smiths’ attorneys designed the perfect solution to their problem: mirror revocable living trusts. Joe’s trust held all of Joe’s separate property and his share of the community property. Likewise, Mary’s trust held her separate property and her community property. While Mary opted to remain as a co-trustee with the ability to guide policy, Northwest Trustee & Management Service handles the administration of the trusts. The trusts become irrevocable on either the death of the trustor or incapacity as determined by trustor’s personal physician.
Here is how the trusts work: during the lifetimes of Joe and Mary, their trusts pay as much of the income or principal needed for their support and maintenance. After the lifetime of either Joe or Mary, his/her trust principal or income is available to provide support and maintenance for the surviving spouse after consideration of outside assets. After the death of both spouses, the assets held in each trust pass to their respective heirs.
Utilizing revocable trusts and the services of Northwest Trustee & Management Services, the Smith’s were able to:
Meet their needs during their lifetimes, regardless of death or incapacity, and
Make sure their children receive the inheritance their parents worked so diligently to accumulate during their lifetimesJoe and Mary found a win-win solution to a dilemma that otherwise could have caused hardship and dissension among their families.
For more information about this article,
Sandy Calbreath – Trust Officer
Northwest Trustee & Management Services
1406 N Pines Rd Spokane Valley WA 99206