Berge & Berge, LLP Blog

Monday, May 18, 2015

Tips for Second Marriages: How to Best Protect Both Your Children & Current Spouse

I am in my second marriage, with children from my first marriage. How can I craft an estate plan that will protect both interests? 

Estate planning often encompasses more than just a Last Will and Testament, and can become increasingly complex as family dynamics change and grow. One common scenario seen by many experienced estate planning lawyers involves testators engaged in a second marriage with children from a first marriage or prior relationship. At the outset, it may seem simple enough: leave everything to the surviving spouse, remainder to the children. However, this “plan” can quickly unravel should the surviving spouse opt to redo his or her estate plan in favor of their own children, a favorite charity, or other surviving family members. One major factor to keep in mind when preparing your estate plan is that once the assets have passed to the surviving spouse, that property then becomes part of that individual’s estate, and may be disposed of in his or her own discretion. 

Keeping assets protected for the surviving spouse and children

One way to avoid the above-described scenario is to set aside certain assets in trust for the benefit of either the surviving spouse or the surviving children. There are many ways to set this up, and one popular trust instrument designed specifically for this scenario is known as the Qualified-Terminable Interest Property trust (or, QTIP trust for short). The QTIP trust creates two sub-trusts – often simply titled as the “A” trust and “B” trust – which are designated for two distinct purposes. The first trust is to contain an amount of assets calculated to adequately provide for the surviving spouse’s health, education, maintenance, and services as needed for the duration of his or her life. This is a finite figure, and is often managed by a trustee to ensure proper distribution. For higher-net worth couples, the spousal trust language will instruct the trustee to only fund the trust with an appropriate amount so as to fulfill the marital estate tax deduction. 

The remaining funds in the “B” trust are then set aside for the benefit of the trustor’s children. If the children are still minors, the trustor must choose an appropriate trustee to oversee the distribution of these assets. For adult children, this may not be necessary. 

In the end, the surviving spouse is adequately provided for, and the deceased’s children will be able to enjoy their parent’s legacy without fear of disinheritance. 

If you are looking to set up an advanced estate plan, or would like to discuss your options upon remarriage, contact the experienced estate planning attorneys of the Law Offices of Berge & Berge LLP. The firm’s office is conveniently located for residents of San Jose and Santa Clara counties, and can be reached by calling 408-985-9918. 

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