San Antonio, Texas (210) 826-1122
Bellevue, Washington (425) 296-2919



PAUL PREMACK, JD, CELA*
8031 Broadway
San Antonio, TX 78209
*Licensed in Texas
BENJAMIN PREMACK, JD** 
11900 NE 1st Street
Bellevue, WA  98005
**Licensed in Washington State & Colorado


San Antonio Probate, San Antonio Estate Planning, San Antonio Elder Law

 
 
Paul Premack, Express-News Banner

San Antonio Express-News
Copyright 2009, Paul Premack
January 27, 2009

Trust Can Solve Second Family Dilemna

Dear Mr. Premack: I am in a happy second marriage. My wife has a daughter I’ve raised from age 4, and I have two grown children. I want to assure all three inherit equal shares of my estate, which is valued just under $2 million. I want my wife to live off the income generated by my estate, and when she dies it goes to all three kids, not just to her daughter. My wife promises she will not change her Will to exclude my children, but I want a guarantee. I want her to A) be forced to include my children, and B) to spend about 3-4% of the estate value per year for living expenses. We did not sign a prenuptial agreement, and most of the assets are from my earnings during our marriage. What type of legal instrument is available to get me these results? – TEM

Fundamentally, you have two conflicting goals. You want to provide for your wife’s long-term financial needs, and you also want to be sure that all three children benefit from your estate.

Begin by classifying your assets as either community or separate property. Since you have no prenuptial agreement, Texas law says earnings during the marriage are community property. Accounts you owned before marriage are separate property, but interest and dividends earned on those separate accounts are community property.

Your wife already owns half of the community property. You have no legal power to restrict how she disposes of her assets without her participation and consent. Likewise, she has no say over how you dispose of your assets.

In that context, the two of you can 1) independently make your own individual plans for using and distributing your half of the community and your own separate property, or 2) working as a team, agree to a plan that uses your combined assets to meet shared long-term goals. There are two legal instruments that can help you care for her and for the three children:

First, you could use a living trust agreement that becomes irrevocable and non-amendable when one of you dies. It would receive all of your combined assets and would dictate by agreement how assets will be used and who receives them when you both die. You jointly retain the right to change the trust while you are both capable, but as soon as one of you loses the ability to agree to a change (whether by incapacity or by death) the trust terms become permanent.

You would agree how much money to consume for living expenses, and establish how much either of you will receive as survivor. You would also lock-in the three children as beneficiaries for after both of you die. Consider an independent Trustee as manager after the first death, to be sure the instructions in the trust are followed.

Second, you could make a Will with a testamentary trust to dispose of only your half of the community and your separate property. In it, you name a trustee and give instructions about spending for your wife’s long-term care. She never owns the funds, so your Will (not hers) instructs that any remaining funds pass equal to all three children on her demise. She can still dispose of her own assets in any way she chooses, even solely to her own child.

Prior Column: End of Life Choices
Next Column: Q&A on Living Trusts, Part 1

Disclaimer: This column answers a specific legal question asked by an individual in Texas. The answer may or may not match your individual situation. Be careful not to treat this column as specific legal advice, as it may not meet your individual needs. It may give you a solid basis for discussion with your own attorney.  You should consult with your personal attorney before you take any action on this or any legal issue. Also, please be aware that laws change, so  this column is valid only as of the date it was published. This communication does not create an attorney-client relationship between the author and the reader.

 

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