What Type of Trust Should Be Established for a Blended Family?

 

In a blended family situation, we understand that the husband and wife may love each other very much, however, there are often concerns about what the surviving spouse will do with the entire estate when the first spouse passes away.  For example, if Husband has three children from a previous marriage, and Wife has two children of her own, Husband may be concerned that if he passes away first, his Wife may end up leaving the entire estate to her two children and complete disinherit his three children. Wife may have the same exact concerns if she were the first to pass away.

 

As a result, estate planners use a special type of trust to alleviate these concerns.  It is known as an AB trust.  An AB trust is a typical revocable living trust during the Husband and Wife's lifetimes, however, it is also a contract between Husband and Wife that provides that, at the death of the first spouse, two trusts must be created: Trust A and Trust B.  Trust A will hold the survivor's half the community property and all of the survivor's separate property, and Trust B will hold the decedent's half of the community property and all of the decedent's separate property.

 

Generally, the surviving spouse becomes the Trustee over both Trust A and Trust B, and can have access to both trusts during his or her lifetime for the survivor's benefit.  The rules are that the survivor is in complete control of Trust A and can do whatever he or she deems appropriate with that half of the estate.  The survivor may choose to amend Trust A to disinherit the deceased spouse's children, or the survivor can leave Trust A in tact and it would go to both Husband and Wife's children equally when the survivor passes away.  

 

The survivor is not in complete control of Trust B, however, and the survivor is not permitted to change the beneficiaries of Trust B because Trust B becomes irrevocable at the death of the first spouse. This is meant to offer protection for the deceased spouse and ensure that at least part of the estate will ultimately go to the children that the deceased spouse had originally planned to leave the estate to.

 

Planning for a blended family can be complicated, but it is very common and our firm focuses on this type of intricate planning to ensure that the interests of both clients are being met.  If you have questions about estate planning or creating a trust for your blended family, please contact our office at  (714) 459-5481 and one of our experienced attorneys will be glad to walk you through the process.

Holly M. Nabiey
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Holly M. Nabiey is an estate planning attorney at Roberts & Associates.