Yours, Mine, And Ours

Blended financial planning for couples with stepchildren

you have life insurance and retirement plans, make sure the proceeds will go to the proper parties after a death. You probably won’t want your ex-spouse to remain the beneficiary of your IRA, for example.”

When making decisions about retirement plans, keep in mind that spouses are entitled to be the beneficiaries of employer-sponsored plans, unless the spouse consents to waive his or her rights to that benefit, and typically the waiver has to be notarized. If you intend to designate someone besides your spouse, such as a child from a previous marriage, as a retirement plan beneficiary, be aware that a spouse’s rights may only be waived by a spouse. Thus, such a waiver can’t be included in a prenuptial agreement. However, a prenuptial agreement might include a promise that such rights will be waived after the marriage, and penalties can be established, in the prenup agreement, in case of failure to fulfill such a promise.

ESTATE PLANNING
A prenuptial agreement should be coordinated with your will, any trust documents, and other elements of your estate plan. You don’t want your will to leave certain assets to your children while those same assets are given to your new spouse as part of a prenuptial agreement. “Whether or not you have a prenuptial agreement,” says Creuzot, “anyone who brings assets into a remarriage, and has concerns about the disposition of those assets, should have a will. What’s more, your will should be prepared by an attorney who specializes in estate planning.”

The Williamses, who tried to treat each of their daughters equally while they were growing up, have carried the same philosophy into their estate planning. “We have individual wills,” says David, “and we both try to provide for each daughter according to her wishes and needs.” As Gloria notes, “Both of our wills contain bequests for all five daughters.”

However, estate planning can be a particularly thorny issue, according to Smith. “One spouse may be worried about dying and leaving assets to the other spouse,” he says. “That spouse may then leave all of those assets to his or her own children, shutting out the children of the first spouse, the one who provided the assets in the first place.”

In such circumstances, Smith says, he’ll often recommend a “spendthrift” trust. “The spouse who sets up the trust names the trustee, generally someone from his or her own side of the family. The trustee is instructed to provide the surviving spouse with the amounts necessary for health, education, maintenance, and support. At some point, perhaps when the decedent’s own children turn 25 or older, the trustee can distribute trust assets to them.”

But not all estate plans work out so easily. “Among my clients is a physician who has a large income and substantial assets, with a son and a daughter who are college educated,” says Smith. “Her husband of more than 10 years isn’t working now, and his five kids haven’t accomplished much in life. When we sat down to come up with an

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