Retirement & Financial Planning Report

As divorces and remarriages increase, many American families include stepsons and stepdaughters along with children from second as well as first marriages. What tools are helpful in planning for yours-mine-and-ours families?

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* QTIP trusts. Qualified terminable interest property (QTIP) trusts can provide lifetime income and access to principal exclusively to the surviving spouse, in return for estate tax deferral. When your surviving spouse dies, the trust assets go to the beneficiaries you have named–presumably your children rather than your spouse’s.

* Prenuptial agreements. A prenuptial agreement can spell out which assets you’re bringing into a marriage and which ones you want to keep as yours, free to pass on to other heirs. For a prenup to work, it must be valid. Both parties must have their own counsel and there must be full disclosure of assets on either side.

* Life insurance. If you’ve remarried and your new spouse is much younger than you are, she might outlive you for many years, during which time your other heirs (your children) may get relatively little, if you’ve set up a QTIP trust for most of your assets. Some of the shortfall may be offset by life insurance, so your kids will get an inheritance at your death.