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Marital Deduction Planning

Do you have a young spouse who you just married and adult children from a prior marriage? Why not just leave your latest spouse a fixed dollar amount or a life insurance policy, and leave the rest of your wealth in trust for your kids and grandkids? Or vice versa?

If your last spouse ends up being the love of your life, taking care of you and wiping your chin when you age, why not leave him or her your entire estate, but leave a specific dollar amount, a specific piece of property (or financial account), or maybe a life insurance policy, to your kids?

A final word about litigation. We see a lot of adult children who want what we refer to as “financial discovery” when a parent dies. The adult kids knew that, at one time, mom or dad was worth millions and millions. And now…not so much. So, they’re convinced mom or dad’s latest spouse – the adult kids’ step-parent – either stole it or unduly influenced their parent into parting with it.

Yes, your adult children often have a mistaken belief about your net worth. One of the biggest misperceptions adult children consistently have is believing their moms or dads are richer than they really are.

The truth is that we’re living longer. This generally means there are more years to fund, or to pay for. As we age, we also require more care, attention, and remedies: at-home health care, nurses’ aids, specialists, expensive prescription drugs, therapists, caregivers, medical devices and apparatus, etc. Sometimes, we need round-the-clock care or 24-hour caregivers or assisted living facilities.

My experience is that most clients don’t hold back when it comes to their own care, during what they may perceive are their last few years on earth. Saving an inheritance for their kids becomes less important.

Money gets spent.

People tend to live life as they age and, if they need assistance and they have the money to pay for it, they spend it. Throw in a few down years in the market or an environment with low interest rates and the investments which mom or dad once had are now a fraction of what they used to be. Aging can be expensive.

In the end, you’re dead. It’s up to you how you want to leave your wealth behind. But, a little bit of thought and reflective, straight-talk planning might make your family a bit happier and less litigious after you’re gone.

It’s certainly your call. After all, it’s your money and their inheritances.

Pankauski’s Bottom Line: consider leaving specific – and separate – inheritances to your latest spouse and your adult children from a prior marriage. Separate them financially. They may not even have any contact, let alone a relationship, when you’re gone. Money should not be the artificial “glue” that holds them together. Avoid the marital trust.

How to Revoke Probate in Florida >

Punitive Damages in Trust Cases >

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