Kaplin Stewart

Creative estate planning for second marriages

One of the most interesting things about estate law is the fact that no two Pennsylvania individuals or families will share the exact same set of needs when it comes to planning their estates. Estate planning is incredibly flexible and easily customizable. There are options available to suit a wide range of goals and priorities. 

Consider the example of a man who has built a successful business and is preparing to marry for the second time. He has two children, only one of which is involved in the family business. He wants to provide for both his new wife and his kids in the event of his death, but he is unsure how to balance the needs of everyone he loves. This scenario requires a careful touch, but a solution can be found in a multiple-step planning approach.

First, the man can transfer his business to the child who is involved by means of an intentional defective trust (IDT). This removes the business from the estate and ensures that it will end up where the owner intends. Best of all, the owner can retain control over the business during his lifetime and will incur no income or capital gains tax from the transfer. The child who is not a party to this transfer can be accommodated in the estate plan by being given a larger share of other assets.

Next, the man creates a qualified terminable interest property (Q-TIP) and transfers all significant assets into that vehicle. He creates a life estate for his new wife so that she will be entitled to live in the family home for the remainder of her lifetime if he should predecease her. She can also benefit from income earned from the assets held within the Q-TIP. The house and the assets will pass down to the adult children upon the death of the wife.

This layered approach meets all of the family’s estate planning needs. It incurs very little in the way of taxes, allows the man to provide for his second wife, and also ensures that his children will receive their intended inheritance. In addition, the plan allows the child who is active in the family business to retain ownership once the father has passed away. This is just one of the many ways that estate planning can be molded to fit a wide range of needs in Pennsylvania and elsewhere.

Source: naplesnews.com, “Estate planning musts“, Irv Blackman, April 20, 2016