Blended Family Trust

The Basics

The Brady Bunch is more and more a reality in today's changing landscape. More couples are adding step-children to the mix, which makes planning a little more complicated. The last thing anyone wants to think about, or even expects, is having their spouse write their children out of the estate. And while most people trust their significant others not to do that, experience tells us that's not always the case. That is why GoGo Estate created the Blended Family Trust.

A Revocable Living Trust is an estate planning arrangement designed to achieve a number of goals. The three primary benefits that a Revocable Living Trust provides:

1. Probate Avoidance/Efficient Wealth Transfer
2. Preservation of Assets
3. Privacy Protection

With a Blended Family Trust, there is an additional benefit: Ensuring that each spouse's family line receives their assets.

To properly unlock all of these benefits, the Blended Family Trust must be "funded." This means that your assets must be directly transferred into the Trust or name the Trust as beneficiary. While this process may seem tedious, GoGo Estate provides Complex Plan purchasers appropriate guides to help them fund their trust.

Who Should Have a Blended Family Trust?

Generally, the following types of customers could benefit from having a Revocable Living Trust:

1. Blended families (duh!)
2. Those with minor children (i.e., those under 18)
3. Those with special needs children
4. Those with more than $250,000
5. Those concerned with an efficient transfer of wealth
6. Those who want to protect assets for future generations

The Details

The Blended Family Trust provided in the Complex Plan is a joint revocable living trust governed by a trust document known as the Trust Agreement. The Trust Agreement acts like the bylaws for the Trust, detailing how the assets held in the Trust will be administered both during life and after death.

While both of you are living, you both have the power to distribute trust assets as you see fit. However, if one of you or both of you become incapacitated, someone else (known as the "successor trustee") distributes trust assets for your health, support, and maintenance. The successor trustee operates in a fiduciary capacity to you, meaning that all of their actions must have your best interests in mind.

What distinguishes the Blended Family Trust from the Revocable Living Trust found in the Standard Plan is how assets are distributed upon the death of the first spouse to die. When one spouse dies, two different trusts are created: (1) the Survivor's Trust and (2) the Family Trust.

The Survivor's Trust consists of the assets that the surviving spouse contributed to the trust before the deceased spouse's death. This subtrust is completely amendable and revocable by the surviving spouse. The Family Trust, on the other hand, is funded with the assets of the deceased spouse. This trust IS NOT revocable by the surviving spouse, although the surviving spouse can still benefit from the assets held in the Family Trust. When the surviving spouse dies, however, they are not allowed to distribute the Family Trust assets to anyone other than the deceased spouse's family line. This protects the deceased spouse's children and grandchildren from being "written out of the trust."

When both of you die, there are three primary ways in which the ultimate beneficiaries (your respective kids and grandkids) receive their share of the trust assets (both from the Survivor's Trust and the Family Trust):

1. Outright Distributions: If the beneficiary is over a certain age or is not receiving means-tested government benefits (like SSI or Medicaid), then the successor trustee will distribute the beneficiary's share of the trust assets outright to the beneficiary with no strings attached.
2. Subtrusts: If the beneficiary is of an age specified by you in the Standard Plan Questionnaire (you can pick between the ages of 21 and 40), the beneficiary's share is held in a "Subtrust" created after your death. Prior to the beneficiary turning that age, they receive distributions for the education, health, support, and maintenance. Once they turn the age you choose, they receive a lump-sum distribution from the trust.
3. Supplemental Needs Trust: If a beneficiary is receiving means-tested government benefits like SSI or Medicaid, the beneficiary's share is distributed into a supplemental needs trust. This is so that the beneficiary does not lose their important government benefits. There are strict distribution requirements and limitations contained within the provisions of the supplemental needs trust.

The remaining provisions of the trust relate to trustee powers, the process for appointment, replacement, or removal of successor trustees, and whether or not the trustee is entitled to compensation (by default, the trustee is entitled to "reasonable compensation"). The trust document also outlines procedures for trust ownership of retirement plans and prevents beneficiaries from contesting the terms of the trust so that your wishes are locked in stone.

Create a Blended Family Trust

If you are interested in having a Blended Family Trust, you should seriously consider GoGo Estate's Complex Plan. If, however, you do not have a blended family, you should consider a Standard Plan instead.