It’s never too early to start conversations about estate planning. In fact, a recent article suggests that estate planning might even begin before a couple gets married, concurrent with any prenuptial agreement discussions.
There are several scenarios where it might be advisable to combine these two matters. For example, perhaps a couple executed a prenuptial agreement because one spouse came into the marriage as a business owner. If the couple later has children, however, the terms of the original prenuptial agreement may be inadequate. For example, in the event of the spouse’s untimely passing, he or she might want the surviving spouse to have access to some of the income from the business in order to provide for the household.
Fortunately, the options in estate planning can accomplish that objective. Proponents of trusts offer them as an estate planning option for avoiding probate and maximizing tax savings. However, given the breadth of trust options, it can be confusing to know where to start.
A revocable trust is a common example of where the grantor also serves as the trustee. That arrangement offers a great deal of flexibility, allowing the same individual to revoke or rewrite the trust document and move, encumber or otherwise control trust assets at will.
Another option is a testamentary trust, which is a legal instrument that will not go into effect until the grantor’s death. In this particular example, a family limited partnership could provide the surviving spouse with income from the business, while not granting control over its operations. The shares of the partnership could be gifted into the testamentary trust, and the surviving spouse could serve as both the trust’s trustee and beneficiary.
Source: The Wall Street Journal, “Creating an Estate Plan Around a Prenup,” Alex Coppola, July 17, 2014
