Carrie Schwab Pomerantz
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Dear Carrie, My wife and I have two children, and I have two children from a previous marriage. How can I make sure that my estate plan treats everyone fairly? --A Reader

Dear Reader, Estate planning in a second marriage can be tricky, especially when there are children from different marriages involved. What seems fair to you may not seem fair to your wife. She, quite naturally, will want to protect herself and your mutual children. And of course, your children will have their own feelings about what's fair.

In my mind, giving each of your kids an equal share of your assets is probably the most equitable -- and possibly the easiest -- solution. After all, it's not just about money. It's also about the way that money so often represents love.

But that's my take. What's important is that you decide yourself what seems most appropriate for your own circumstances.

In any case, communication is essential. I know that talking about money is often difficult. And talking about inheritance can be even tougher because you need to confront the painful possibility of someone's death. However, that's what you need to do first.

An estate-planning attorney can help you with the technical aspects of dividing up your estate, but you and your wife need to do some serious upfront thinking, and talk through your concerns openly and honestly.

Start by looking at different scenarios

In estate planning for a single family, the flow of assets is often quite simple: Assets go first to the surviving spouse, then to the children. But you have more to consider. If you leave everything to your current wife, she would be responsible for making sure that the children from your first marriage get their fair share. This can be an issue for any blended family, but especially when the spouse and first set of children are close in age. It's smart to look at alternatives.

For instance, let's say you and your wife each have separate assets that you've brought into the marriage as well as assets that you own together. Just as an example, if you should die first, do you want at least some of your assets to go directly to your children from your first marriage? Or would you prefer that your wife have access to the income from those assets during her lifetime with the principal passing equally to each of your children upon her death?

And what if your wife dies first? Does she want everything to go to you, which could then be passed on to all your children? Or would she want some of her assets to go directly to your mutual children?

How would you split things up if you die together? Most difficult of all to consider, what if one of the children dies first? How would either of you distribute assets between the surviving spouse and children? As you can see, there are a lot of questions to answer.

Consider your wishes separately and together

There's so much emotion around these decisions that it might be easier if you and your wife think about your wishes separately, and then bring your ideas together.

Listen to each other's concerns and fears and be open to each other's attitudes about what's fair -- both for yourselves and for your children. There should be no guilt or blame here. You're talking about your individual legacies. Ideally, you'll honor each other's decisions and come to some general agreements.

Talk to an estate-planning attorney

Once you've done the initial thinking, consult with an estate-planning attorney who can help you consider the various scenarios. He or she will then discuss the ways to make sure your assets are distributed according to your wishes. One option is a living trust, which gives you control of your assets during your lifetime, and then passes them directly to your designated heirs upon your death, avoiding probate and providing potential tax benefits.

Your attorney may also suggest a Qualified Terminable Interest Property (QTIP) Trust or life estate. With this type of trust, your assets could provide income for your wife until her death or remarriage, and then they would pass to the beneficiaries of the trust -- your children or whomever you name.

You'll also want to discuss how you want to distribute your personal possessions (for example, jewelry, household items, etc., many of which may have sentimental as well as financial value), and the best way to designate beneficiaries for life insurance and retirement accounts.

Set expectations

When the kids are old enough to understand, share your plans as well as the reasons for your decisions. Setting everyone's expectations about their inheritance is important to avoid family resentments when the time comes. The thinking -- and talking -- that you do now may not only mean greater family accord in the future, but also greater family harmony today.

Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER(tm), is president of Charles Schwab Foundation and author of "It Pays to Talk." You can e-mail Carrie at askcarrie@schwab.com. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

COPYRIGHT 2012 CHARLES SCHWAB & CO., INC. MEMBER SIPC

DIST BY CREATORS SYNDICATE, INC.

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Carrie Schwab Pomerantz

Carrie Schwab Pomerantz is a Motley Fool contributor.

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