Discretionary Living Trusts A legacy for generations

Written by Trust Specialist, Mervin Messias, it is the culmination of knowledge and expertise that has been acquired over many years’ study and practice of Trust law.

The author recommends the use of Trusts as part of estate planning because they provide solutions to many potentially complicated problems related to asset protection, succession planning, and disability protection. Many little-known benefits of Trusts are revealed to help protect your hard-earned wealth for generations to come. A Trust circumvents the whole process of winding up an estate, together with its potential delays, hassles and frustration.

In fact, a Trust deserves pride of place in any estate plan. It means business as usual, even after death, with no executor, executor’s fees or estate duty.

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    Second marriages can be complicated, often the new relationship is accompanied by someone else’s children. You will discover that finances become a core component. This new partnership means that new individual and combined family needs must be met.

    What is especially pertinent to blended families, is that each new spouse may want to leave property to different beneficiaries. To find the most equitable way forward, it is suggested that you enlist the services of an Estate Planner/Trust Specialist with proven experience.

    As a neutral party, he or she will be able to identify the issues and find solutions that meet the needs of both parties, as well as their respective children – current and future. Each partner needs first to update or create a new Will.

    Second, to formalise an estate plan that supports the new relationship and benefits the blended family as a brand-new entity. The estate plan should clearly identify the combined extent of the pie (assets and liabilities of both parties), what should be combined and shared, what should be separated to make provision for future contingencies or personal responsibilities and what should be under consideration.

    There is no monetary formula to apply, it is a negotiation based on personal wishes, assets and responsibilities.

    Think about:

    • Your own needs and resources.
    • The needs and resources of your new spouse.
    • The financial commitment to your previous spouse.
    • The needs of existing children.
    • The needs of any future children you may have together.
    • The relationship with your stepchildren and what they may need from you.

    A core planning issue for blended families is how to divide one’s resources so that children from a previous marriage (or relationship) are not compromised. The extended life expectancy of a younger spouse has to be factored into the plan, especially if the younger spouse has been encouraged to leave the work force. Giving up a good proportion of productive working years will impact this person’s future needs and resources.

    Think about what you would like to accomplish in terms of material provision, during your life and after you die. How will you make adequate provision for the new spouse (and corresponding children) as well as ensure that what is left when this newer spouse dies, is shared fairly with your children from a former spouse?

    When it comes down to who-should-get-what when you die, blended families are likely to have more parties with a vested interest in their slice of the pie, the perfect recipe for a cross-family feud. To manage expectations and mitigate contentious claims, you need a detailed plan – and trusts offer the most proactive solution.

    What you should strive to prevent:

    • The surviving spouse and children competing for funds from a common trust, or similar source.
    • The children having to wait for the surviving spouse to die before they can receive their inheritance.
    • Giving full control of your entire estate to your current spouse.
    • Accepting a verbal agreement in good faith.

    Make sure both parties formalise their financial intentions and plans in a will and an estate plan, so that there are no cripplingly rude shocks when one party dies.

    Should you make provision for your stepchildren?

    That would depend on the extent of your resources and relationship with them. The point is, plan carefully at the outset. An Estate Planner/Trust Specialist would be of immense value with all the experience and knowledge necessary to steer you in the right direction and formulate a plan that sits comfortably with all concerned.



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