Estate Planning: Protecting Your Assets and Blended Family

He reluctantly said he would leave her almost everything if I died. We are building a house on the beach and I own the house my daughter wants. I put it in a revocable trust for her to inherit. He swears he will honor my wishes, but I have my doubts if their relationship doesn’t mend.

How can I be 100% sure she will get the house I own?

Caught in between

A report: I’m 35 and don’t have a mortgage. My boyfriend, 55, wants me to move into his house and help him pay off his mortgage. What should I do?

Dear Pris,

Blended families are not unusual, and because there is only one child, your case is simpler than most.

If you purchased your home before your marriage and did not use funds from a joint account to pay the mortgage and/or your husband did not contribute substantially to the maintenance or renovation of this house, it will remain a separate property. Your daughter can inherit it.

Your daughter will only pay capital gains on the market value at the time of your death. So if she bought the house for $500,000 and it was worth $1 million when you died and $1.5 million when she finally decided to sell it, she would only pay capital gains on the last $500,000.

If you put your daughter on the deed, it could cost her hundreds of thousands of dollars if/when she decides to sell it. If you paid $500,000 and she sells the house for $1.5 million, your daughter will pay capital gains on the difference, minus her capital gains exclusion and fees.

You can leave your daughter other separate assets in your will – any bank accounts you held before you were married – and be sure to name your daughter as a beneficiary on other accounts, such as your life insurance policy. (depending on the state you live in).

Beyond that, you trust your husband to do the right thing. Or, more accurately, you trust it to do the right thing as you see it. He may in fact decide that his relationship with your daughter has deteriorated to the point that, in his eyes, she deserves $1.

Creating trusts for a blended family

You’re right: a revocable trust does what it says on the tin: it can be modified if you predecease your husband. (This isn’t exactly a no-brainer, especially if your husband is almost a decade older than you.) Still, you’re right to plan for all eventualities.

You can create a joint trust with your husband that will divide certain assets if you die first. Your husband’s assets would immediately transfer to a revocable “survivor trust,” while your assets would transfer to a “bypass trust,” which is irrevocable. Consult a lawyer and/or tax professional.

“A survivor’s trust can help assets avoid the probate process. By doing so, beneficiaries will be able to recover assets sooner,” according to Trust & Will, an estate planning resource. Assets in a bypass trust can avoid estate and probate taxes, which can be time-consuming and costly.

This gives you more flexibility. “The joint trust allows each spouse to transfer assets where they want, when they want, to whom they want, and how they want,” according to this advice from Robinson & Henry, P.C., a law firm with offices in Colorado. and Texas.

“Under a joint trust, a general trust is created with a separate trust under each spouse. This means that three trusts are created in one trust document. Upon the death of the first spouse, the joint trust transfers its assets into two separate trusts,” it says.

An attorney will help you navigate the process, but you should leave nothing to chance.

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