By Terry Savage on May 06, 2014 | Financial Planning / Retirement

I am working on my own Living Trust. I need help & advice on how to deal with stepchildren on both sides. My husband & I have different view points on how to deal with this. He has very hard line ideas & I want to be fair to all of us. We have been married for almost 34 years & love each other but are having great issues with this. He brought 2 children ages 7 & 12 to the marriage & I brought 3 children ages 9, 10 & 13. One of my children passed away so we each have 2 children. I believe everything should go to the surviving spouse & then eventually be split between all 4. He believes “our” money should be split 4 ways but that “his” money should be split 1/3 to each of his children & 1/3 to me. And then the same with “my” money – 1/3 to each of my children & 1/3 to him. I think his way leaves the surviving spouse at risk & could leave each child with a feeling of not being important enough to the stepparent.

How do we resolve this & still survive???

Terry Says:  OK, this is complicated and should be resolved with an Estate Planning Attorney.  But here’s a suggestion:  a couple of life insurance policies will solve a lot of this issue.  You should each have a policy on your own life, and your children should be the beneficiaries!  I assume they are no longer minors, and could be co-beneficiaries.  (In fact, an estate planning attorney might suggest you set up an irrevocable trust to own the policies — keeping the cash out of your estate and thus not subject to estate taxes).

Yes, you’ll have to pay for the life insurance, but that might be the price of peace of mind.  OR, you could consider another type of policy, perhaps in addition.  It would be a first-to-die policy (less expensive than traditional) so that the surviving spouse could count on enough money to pay the balance of the mortgage and other expenses.

Dividing things by percentages has its drawbacks for several reasons. First those percentages might not represent a lot of money by the time either of you dies!  Second, some assets are not easily divisible, such as a home, which must be sold.  And each of you should name a beneficiary for your own retirement account.

I don’t know who owns what, and whether you’ve kept your assets separate, or comingled all of them.  That’s why you need a good estate planning attorney to help you through this process.  It should not be adversarial, and the life insurance increases the amount to be divided at a relatively small cost.  If you live in the Chicago area, contact my estate planning specialist, Janna Dutton at (312) 899-0950.   I trust her completely, and had her do my mother’s plan and that of my best friend.



a personal
finance question