If you remarried and you each have adult children from before, a standard living trust will quietly pick a winner. Leave everything to your spouse outright and your own kids depend on your spouse's goodwill for the rest of their lives. Lock everything up for your kids and your spouse can end up short. The fix is to provide for both, with a structure built to hold. Here are the three levers we use for blended families in Roseville, and how to decide which one fits.
I wrote about how a blended family needs more than a basic trust, including the community property and prenup pieces in Estate Planning for Blended Families and Second Marriages in California. This post describes the estate plan structure and tools we typically use for a California blended family.
Start with the core structure. When the first spouse dies, you do not want everything sliding to the survivor outright or all in a revocable survivor's trust. Outright means they own it, and once they own it they can leave it to anyone, including their own children or a future husband. And a survivor's trust is essentially the same: the surviving spouse has complete control and can change the remainder beneficiaries.
Instead of an outright distribution or all to the survivor's trust, the deceased spouse's share goes into a trust, usually a QTIP (not the cotton swab, but a qualified terminal interest property trust - I know, it's a weird tax lawyery term, just go with it for now). A QTIP is an irrevocable trust that is created out of a joint living trust and is funded with the deceased spouse's share of the living trust assets. It supports the survivor for life but she cannot amend it. On the survivor's death, the remainder goes to the first spouse's children, as that spouse intended.
A joint living trust with QTIP provisions is the core structure. The three levers below are how you make the plan work, and how you give your kids something more solid than a promise they'll get some of whatever's left when the survivor dies.
The QTIP protects your children on paper. But the trustees make or break it.
If your surviving spouse is the sole trustee of the QTIP, you have a built-in conflict. The spouse benefits from draining the trust. Your children are the remainder beneficiaries, and they benefit from the trust growing. And the spouse has full control.
The purpose of a QTIP trust is to give the surviving spouse access to the deceased spouse's share, and to prevent her from amending the trust to remeove the deceased spouse's children and name her children or a new spouse as the remainder beneficiaries. A QTIP trust is irrevocable. The beneficiaries can't be changed. If you name your kids as the remainder beneficiaries, she can't change it. But, if she is the sole trustee, she can distribute all the trust funds to herself so there is nothing left for your children. Sure it's irrevocable, but it now has nothing in it.
Naming one of your children as co-trustee alongside your spouse removes the conflict. Now distributions and investment decisions take two signatures, one representing the spouse and one representing the remainder beneficiaries. The spouse cannot quietly spend down the principal, and the child has a seat at the table and can see the accounts. It is not a hostile arrangement. It is two people with different interests that must work together.
This works best when your spouse and the child can be in a room together without it turning into a standoff. When they cannot, a neutral professional co-trustee is the better choice.
The QTIP is durable, but it doesn't pay out your children until the second death, which could be twenty years out. A lot can happen to a trust in twenty years. The clear path is to give your children something now, at the first death.
But this only works if there is enough for your surviving spouse to live on after the carve-out. A couple who each came into the marriage in their fifties or sixties with a home and their own retirement savings often has enough on each side so that a slice can go to the kids at the first death without leaving the survivor short. You leave a defined amount to your children outright when the first spouse dies, and the rest funds the survivor's support through the QTIP. Your kids get real money, in hand, regardless of what happens to the trust over the next two decades. If the survivor later amends their own share to cut your kids out, or the two sides of the family stop speaking, or the trust gets litigated, your children are not left with nothing. They already got something.
The judgment call is how big the carve-out can be without leaving your spouse too little. On a Roseville estate where the bulk of the estate value is the home, and the bank and investment accounts are less robust, the carve-out has to be sized carefully or it forces a sale of the home, which forces your spouse to move out of your home.
If the family home is community property, and the husband and wife bought it many years ago, a Roseville home will have appreciated quite a bit over the years. And even though the home may be the most valuable asset, it may not be wise to force a sale of the home at the first death. Way better to leave other assets, if possible, to the children. In which case, it needs to be a distribution of the deceased spouse's share of the community property, or even better, his separate property.
California is a community property state. Money earned during the marriage is community property, and separate property that gets commingled with it can lose its character. A prenuptial agreement will keep separate property separate. But if you didn't sign one before your marriage, you can create a postnuptial agreement to establish certain assets as separate property.
Life insurance paid from a separate-property account. Let's say the husband has children from his first marriage. He takes out a life insurance policy, names his children as the beneficiaries, and pays the premiums from his separate-property bank account while he is alive. When he dies, the death benefit goes straight to his kids, outside the trust and outside probate, in cash. There is no funding risk because he pays the premiums himself during his lifetime and the death benefits are distributed to his children. Nothing depends on the surviving spouse doing anything. If he wants, he can name his wife as a beneficiary for a portion of the death benefit so the policy takes care of both sides at once.
Paying the insurance policy premium from the separate-property account keeps the wife from later claiming the premiums were community funds and clawing back a share. For a family whose net worth is mostly the house, this can be an elegant solution because it gets cash to the kids without having to sell the home.
A separate-property trust. If he has enough that he can leave a meaningful amount to his children even if he dies first, he can set up a separate-property trust, distinct from the joint trust with his second wife. His separate property goes into it, his children are the beneficiaries, and it operates independently of whatever happens to the joint trust over the survivor's lifetime. He can also name his wife as a beneficiary. The point is that this trust is his, funded with his separate property, pointed at his kids, and not subject to the survivor's control the way the joint trust's survivor's share would be.
Retirement accounts with a spousal waiver. He can also name his children from the first marriage as the primary beneficiaries of a retirement plan. The wrinkle is that a 401(k) or other ERISA plan requires the current spouse to sign a written waiver consenting to anyone other than herself as primary beneficiary. IRAs do not carry the same federal requirement, though most custodians impose their own. This is a valid option, but only if the wife is willing to sign the waiver.
Need to create or update your estate plan? Schedule a free fifteen minute intro call with one of our attorneys. Call (916) 983-9410 or Click here.
It depends on your assets, your spouse's assets, and your planning objectives.
If a good portion of the estate is the deceased spouse's separate property, the separate-property strategy will work: a separate-property trust or life insurance policy pointed to the kids, funded from a separate-property account, while the joint trust handles what the couple built together. If most of the value is jointly held or community property, the QTIP strategy carries more of the load, with a child as co-trustee to keep it honest and, if possible, a carve-out at the first death so the kids are never left with only a promise.
The Roseville profile, a high-equity house plus retirement savings on each side, usually calls for some of both: the QTIP for the shared assets, a carve-out or a life insurance policy to get the children something clean and immediate, and a postnuptial agreement to keep the separate property separate. The right mix depends on how much there is, how it is held, and how the two sides of the family actually get along. There is no one-size-fits-all trust for this.
Roseville, Granite Bay, and the broader Placer County region grew fast over the last two decades, and much of that growth includes families relocating and reforming. Couples in their fifties and sixties, each with adult children, each with a home and retirement savings, are common. A house bought for $400,000 fifteen years ago that is worth $1.2 million today is no longer a modest asset to pass along casually.
You work directly with one of our attorneys from your first meeting to your last. No handoff to a paralegal. Estate planning and trust administration are all we have done since 1996. Our Roseville office estate planning attorney, Hannah David, meets with Roseville, Granite Bay, Rocklin, and Lincoln families at 2520 Douglas Blvd., Suite 160. Most estate plans are finished in about three weeks. More involved plans may take longer. We can meet you in the Roseville office, or handle the whole thing by Zoom, whichever you prefer.
Usually not. If your spouse is the sole trustee of a QTIP, they sit on both sides of a conflict: they benefit from spending the trust down for income, while your children benefit from it growing. Naming one of your children as co-trustee alongside your spouse, or using a neutral professional trustee, keeps that tension in check.
Leave your children a defined share outright at the first death, assuming there are enough assets for your spouse to live on without it. Money received now cannot be undone by a later amendment, a soured relationship, or litigation over the trust. It is the simplest path against everything that can go wrong over a long survivorship.
Yes, and it is often the cleanest option. The spouse with children from a prior marriage names those children on a policy and pays the premiums from a separate-property account during his lifetime. At his death, the benefit goes to his kids directly, in cash, outside the trust and outside probate. Because he funds it himself while alive, there is no risk of the surviving spouse cutting off premiums. A postnuptial agreement establishes the separate-property account that keeps the premiums, and the payout, insulated from a community-property claim.
It is a trust holding only your separate property, kept distinct from the joint trust you share with your spouse, with your children from a prior marriage as the beneficiaries. It makes sense when you have enough separate property to leave your kids a meaningful amount and you want it to operate independently of your joint trust. You can name your spouse as a partial beneficiary of it as well. A postnuptial agreement that clarifies what is separate property makes this much cleaner to set up and defend.
It helps, because it clarifies what is separate property and what is community property before anything gets commingled. If you did not sign one, the separate-versus-community question can still be handled in the estate plan with more careful drafting and a postnuptial agreement.
It can. The structures here are more involved than a basic living trust, so the work falls outside the base flat fee. We tell you the flat fee for your specific situation before any work starts.
Call us at (916) 983-9410 or click Get Started to schedule a free intro call.
We serve Roseville, Granite Bay, Rocklin, and Lincoln families from our Roseville office. We also work with clients from our El Dorado Hills, San Luis Obispo, and San Diego offices, and virtually from anywhere in California.