Client Experiences
(names and faces change to protect privacy)

Equal Doesn't Always Mean Fair
Blended Families Provide Unique Challenges for Dividing Assets

---

Andrew (59, Retired Business Owner)

• Andrew has 5 biological children and 2 step-children from a previous marriage
• The majority of Andrew’s wealth is from family assets
• significant wealth to protect on his side of the family

Nancy (58, Retired Professional)

• Nancy has 4 adult children from a previous marriage.
  
• The majority of Nancy’s wealth is in her tax-deferred IRA Account​
• significant wealth to protect on her side of the family

Both Andrew and Nancy are widowers who found each other later in life.  Both spouses are financially independent.  Respectful of each other’s contributions, each agreed that they wanted their combined assets to be available for the surviving spouse and then to be split evenly among their seven combined children.  However, it wasn’t that simple.  The challenge arose when trying to figure out exactly how to divide the assets. 

The Clients' Concerns:

​Having experienced the prior loss of loved ones, Andrew and Nancy's primary concern was ensuring that the other is well taken care of in the event any medical expenses arise in the future.  As a combined family unit they also wanted to ensure that all of their respective children were treated equally and fairly upon their deaths.  The combined children range in age from 20 to 37 and the clients were concerned about their children coming into sudden wealth. Knowing that dementia, undue influence and remarriage can influence decisions later in life they also wanted to ensure that the plan they decided on together remains in place after the first spouse passes.  Finally, Andrew and Nancy wanted to insure that the estate plan was set up to be as tax-efficient as possible maximizing the inheritance left to their children.

How We Helped:

Because Andrew holds the majority of the couple’s wealth, the couple’s desire to leave their combined wealth in equal shares to all of the children was not going to be that simple.  During our estate planning sessions the couple soon realized that many scenarios might arise creating a windfall for one group of children while completely cutting out the other spouse’s children from the estate.   To address these concerns we needed to focus on what was fair for the respective children not necessary what was equal. 
 
First, we constructed a plan making the majority of the couple’s combined net worth available for the support and care of the surviving spouse in the event of the other spouse’s death.  Specific trust provisions were included to ensure that the surviving spouse is fully taken care of during his or her lifetime, while also ensuring that the trust assets are spent responsibility.  By leaving the assets in trust for the surviving spouse the plan also guarantees that any funds remaining in the trust will pass to the deceased spouse’s children and not as the surviving spouse may later direct as the result of subsequent remarriage or duress.  Rather than leaving the combined marital assets equally to all of the children upon the surviving spouse’s death, we drafted trust provisions so that each set of children were only entitled to their respective parent’s share of the remaining marital property.  This reduced the risk of the deceased spouse’s children incurring an inequitable result after the death of their parent. 
 
Second, to address the couple’s concern about their children’s sudden inheritance of wealth, trust provisions were added requiring each child’s inheritance to be held in trust and ultimately distributed using a stair-step approach upon the child obtaining designated ages (e.g., 1/3rd at age 30, 1/3rd at age 40, and 1/3rd at age 50).  Special provisions were also added allowing distributions for major life events such as a first wedding or home purchase. 
 
Third, with the majority of Nancy’s wealth being held in an IRA we needed to make certain adjustments to the estate plan to allow Nancy’s children to take full advantage of the tax-deferral opportunities available to beneficiaries.  We were able to make certain adjustments to the marital estate still allowing for Andrew to be taken care of in the event of Nancy’s death, but also allowing for Nancy to leave her IRA directly to her three children in an IRA Trust.  By utilizing an IRA Trust and proper beneficiary designation drafting, we were able to ensure that each of Nancy’s children will be able to defer taxes on his or her inherited IRA to the maximum extent allowed under the law. 

See Our Process

---

Creating a Family Legacy
Providing Education for Years to Come

Frank (81, Retired)

• Frank has large estate over the estate tax exemption amount
• Frank has 4 grandchildren all under the age of 10 and potentially more on the way
• Frank has previously set up separate gifting trusts for three of his grandchildren
• Frank wants to combine the education funds into one pot trust for his grandchildren and future generations

Frank knows the value of a good education.  He approached our office wanting to ensure that his current grandchildren and the generations to come will have the opportunity to go to college and pursue their dreams the same way he did.  Frank also has a large net worth an estate tax problem.  He wants to structure his planned giving in a way that reduces the overall value of his estate. 

The Client's Concerns:

Frank didn’t want his children to have to worry about the increasing costs of sending his grandchildren to college.  He also knew the importance of instilling hard work and wanted to ensure that his grandchildren were willing to do their part prior to paying for expenses on their behalf.   Finally, Frank liked the idea of creating a family legacy of education for generations to come.

How We Helped:

We worked with Frank to establish an education dynasty trust for the benefit of his current grandchildren and their future descendants.  As of 2017, Frank and his wife can contribute up to $28,000 per grandchild per year ($112,000 total) under the annual gift tax exclusion thereby reducing the size of their combined estate.  All funds contributed to the education trust will be available to all of the current and future grandchildren to use towards college expenses.  Certain restrictions were drafted into the trust document requiring that the funds be administered responsibility for the grandchildren (i.e., the grandchildren are required to maintain C grade point average and distributions are limited to four years) in order to preserve funds for future generations.  All funds not used by Frank’s current grandchildren will be invested for the education needs of future generations. 

Request Free Consult

---

Estate Planning on a Budget
Focusing on the Future

Dave (33, IT Consultant)
​Cara (35, Nurse)

• Recently married
• Expecting their first child soon
• They are planning on having more children in the future 
• The majority of their wealth is concentrated in their home and their tax-deferred retirement assets

Like most young families, Dave and Cara were busy juggling professional careers and had given little to no thought about estate planning.  That all changed when they found out that Cara was pregnant.  With a little one on the way the couple needed to get a plan in place in case one day they weren’t around. 

The Clients' Concerns:

Dave and Cara's primary concern was making sure that the guardians of their choosing were properly appointed to care for their future children in the event of their deaths.  Their other concern was making sure that each of their children had an opportunity to go to college.  Since the couple was still in the process of building their estate, they needed  an estate plan that maximized the value of their small but growing estate.

How We Helped:

Young and future born children present a unique planning challenge.  The plan had to be flexible to account for the unknown needs of the future born children.  We prepared a trust based plan for Dave and Cara with ancillary Wills stating the clients’ preference for appointing guardians.  This structure allows the client to minimize exposure to probate fees and costs thereby maximizing the estate available to their children in the event of a premature death.  In the joint trust agreement, we drafted provisions to establish a single education pot trust for the benefit of all of Dave and Cara’s future born children.  The primary purpose of the trust is cover college expenses, but the trustee can distribute funds for other purposes such as health and support, as needed.  Once the youngest of their children reaches age 22, any remaining funds in the trust will be split evenly among the children to be held in further trust.  By managing the clients’ entire estate as a single trust until the youngest child reaches age 22, we are helping to ensure that funds are available to give the younger children the same educational opportunities that the older children will receive.  Since the majority of Dave and Cara’s wealth is in tax-deferred IRA accounts, we structured the plan to utilize a combination of spousal-rollovers and conduit trust provisions thereby maximizing tax-deferral possibilities. 

Have an estate planning question or concern?  Tell us your story and we'll guide you towards peace of mind. 

Schedule a Free Consult