Mixed Families & Special Needs Trusts
The Big Planning Problem
When there are children from previous marriages, special needs, disabled persons, or other blending of families, there are questions as to the fairest way to allocate assets. Typically, there are existing promises and implied interests that could get lost in the new mixture.
A single agreement such as a premarital agreement or living trust may provide the answers and act as a guide to resolution.
Unfortunately, it is usually complicated to put it all in a single document for all beneficiaries, especially with the possibility of so many different resolutions and not knowing the chain of survival, health conditions, degrees of success, or failure, or potential conflicts. A single document can contain many confusing details.
What is Fair?
The solution could be simple. We suggest that the assets already acquired by the current owner be put into a trust for the current beneficiary of that person.
A second trust could benefit other combinations of beneficiaries. Then, of course the other person does the same with their assets. Additionally, other assets could go into a new trust benefiting the combined beneficiaries.
Further tweaking could be to use different percentages for matching investment or effort.
This may seem complicated, but this is actually simpler.
By having different trusts, each has a single purpose and solution. No mixing or awkward discussions or complications or disclosure of unnecessary details.
A new house is purchased for the new family after selling their individual houses. If 30% of the down payment came from one and 70% from the other, the beneficiaries of each could use a matched percentage.
It is important to consider the long-term effects of this arrangement too. For example, if the man built additional improvements from his efforts to double the value of the property, the percentage should be modified as well, whereas if she paid for the materials, perhaps not.
Obviously, the levels of definition and continual changes may make it difficult to continue to be fair. Starting out fair, and making provisions for the largest assets, should make it an overall fair plan, without the need to worry over small things.
In some cases, durability of the blended family was rewarded by automatic blending of the percentage.
- Year 1 - 70% her children / 30% his children
- Year 2 - 65% her children / 35% his children
- Year 3 - 60% her children / 40% his children
- Year 4 - 55% her children / 45% his children
- Year 5 - 50% her children / 50% his children
We are happy to suggest potential solutions to individual circumstances.