|
|
 |
|
| 2nd Families |
Tailoring Our Legacies
Harvey D. Shapiro
11/01/2004
|
An experienced estate
planner should be able to calculate how much of our wealth to allocate to the
QTIP trust to enable our spouse to continue to live at his or her current income
level. Upon our spouse’s death, any funds remaining in the trust will pass to
our inheritors. However, those of us with young spouses who maintain expensive
lifestyles might have to inject so much wealth into the trust upfront that there
will not be much left over for bequests, notes Michael J. Cenatiempo, a partner
at Cenatiempo & Ditta in Houston. In these cases, he suggests putting a life
insurance policy into the trust, which will fund our bequests when we
die.
| If we die at 75 and leave our wealth in trust to our 38-year- old second wife,
she might well outlive our children in their 50s, precluding them from ever
receiving their bequests. |
Cenatiempo also warns that a QTIP trust works most effectively if our
surviving spouse is much older than our children or other beneficiaries.
Otherwise, our offspring might face a prolonged wait for their inheritance. If
we die at 75 and leave our wealth in trust to our 38-year-old second wife, she
might well outlive our children in their 50s, precluding them from ever
receiving their bequests. Even if our children are much younger than our second
spouse, Cenatiempo warns, “If he lives to 103, the kids are going to be really
old before they get the money.”
If this is the case, or for some other reason
we ascertain that a QTIP trust is not suitable for our family, we can still add
flexibility to our estate plan by setting specific parameters for a traditional
trust that take into account our new family’s structure. We can stipulate, for
example, that our surviving spouse will receive only the income derived from
investments in the trust; the principal must remain intact. We can define the
income paid in terms of a percentage of the total return on the investments, or
even in terms of maintaining a specific lifestyle. We can also empower the
trustee to invade the principal if our spouse needs extraordinary financing for
something specific, such as an unforeseen medical problem. We can also specify
that the income stop if the spouse remarries, or if our spouse moves in with
someone after we die.
 In Our Stead
The best way to ensure our estate plans are implemented in
accord with our wishes is to hire a competent trustee. This is a crucial role,
because the trustee will monitor payments to our spouse over his or her lifetime
and serve as an arbiter of unusual requests for funds. For example, if our
surviving spouse needs to renovate the family home, the trustee can choose to
invade the principal of the trust and dispense funds beyond the standard trust
payments.
A trustee can be a family member, a trusted professional advisor or
an institution. Each type has benefits and disadvantages. Family members might
be well suited because they personally know our beneficiaries. Many family
members appointed as trustees “do more than someone impartial would because they
don’t want to appear to favor themselves,” Young adds. But family members might
also be biased. “There can be built-in conflict,” warns Raymond H. Young, a
partner in Young & Bayle, a Boston law firm specializing in trusts and
estates. Dividing an estate is a zero-sum game, so “if your child is the
trustee, he may say, ‘If I don’t distribute much to my stepmother, there will be
more for me,’” he notes.
The most useful yardstick we can employ when
selecting a family trustee is simply our instinct for judging the individual’s
character, he counsels.
Even the most dependable of relatives get old, infirm
and die. Our chosen trustee might also be unprepared for the complexities of the
job. This is one reason we often turn to personal advisors, such as the family
attorney. They are familiar with our loved ones, but are far more likely to
remain dispassionate and disinterested. Of course, professional advisors also
get old and retire or die, hence the advantage of institutional trustees.
“Some people try to get the best of both worlds,” Young says, by appointing
co-trustees. “You give someone from the family a hand in this, but you have a
bank or professional trustee for recordkeeping and investing—always with the
idea that Uncle Harry is there with the right to say, ‘You’re not doing this
just right.’”
Living Documents
As our second marriages unfold, we may want to alter our
estate plans. If we have children with our new spouse, we will need to amend the
plans to include them. Likewise, when we grow close to our new stepchildren, we
may want to include them in our plans; we may even want to adopt them. These
changes will require us to seek counsel from seasoned professionals. Our
advisors should have expertise in matrimonial and inheritance law.
Photo Illustration by Paul Collin. Section
Photography by Claudia
Kunin.
Additional Information
 Iron-Clad Agreements
 Minor
Details
|
|
|
|
|
|
|
