Your life just changed — shouldn’t your plans for your family change, too?

A second marriage could usher in any number of financial complications. Not all divorces are amicable, after all, and not all second marriages are without children. Updating your trust plan can help bring clarity, thereby averting discussions with family members around touchy money matters. With a revocable trust, you could add and re-distribute assets between stepchildren, or add or remove an ex-spouse.

A longtime client of the bank used this option recently, following a health scare that made her wonder what might happen to the wealth she brought to her second marriage in the event of a more serious medical issue. Because she already had a revocable trust in place, she merely altered its terms so that, if she were to pass away, it would take care of her second husband for life while continuing to support the children from her first marriage. That way, even if the widower’s relationship with his stepchildren soured, he would remain comfortable but couldn’t restrict the children’s access to their portion of the funds.

Parents love all their children equally, but that doesn’t mean siblings should all receive the same financial treatment. Bebeau recalls one corporate executive who learned that her 21-year-old son wanted to pursue a career as an artist, while his sister was two years into law school. This led the executive to think hard about how her children’s needs might differ over time, and how she wanted to support them.

She brought these thoughts to a conversation with Bebeau. “As we looked at a trust plan together, we considered whether each child would benefit from different boundaries that reflected their different career choices,” says Bebeau.

In the end, the executive chose identical trust provisions for her children, recognizing that the boundaries set would benefit each child differently. By authorizing the trustee to make distributions for each child’s health, education, maintenance and support, the trustee could evaluate each child’s different situation to make distribution decisions.  For example, if her son decided to go back to school, the trust assets could be used to support his educational pursuits.  Should either child take time out of their work to raise a family, trust assets could support these additional responsibilities. The executive also took an important step by adding any future grandchildren as potential beneficiaries, so that trust assets could also be used to support them. The executive also chose to keep the assets in lifetime trusts for her children to protect their inheritance from a potential divorce or any other creditor issue that might arise in the future.

This way of organizing the trust gave the executive flexibility to address the differing needs of her children, without necessarily treating them differently as she crafted her estate plan. 

As your children grow up, they may wind up in unexpected circumstances that complicate their financial situation. Say your daughter attends medical school and becomes a successful surgeon — which comes with the risk of malpractice lawsuits that could jeopardize any assets in her name. Or your grandson goes through a bitter divorce and is subject to an aggressive lawsuit.

One key advantage of a revocable trust is the opportunity it affords you to revisit the original document and remove or add assets from your estate while maintaining control over how they’re disbursed. It would shield its assets from any lawsuits your daughter might meet, and would certainly protect the family’s accumulated wealth from a vengeful ex-daughter-in-law, while still granting the son and his children the benefit of the assets.

Family gatherings in the mountains or at the shore can create lifelong bonds between siblings, in-laws, even distant relatives. But a vacation home can be costly to maintain and can’t be divided easily among siblings. And it can also create a tax hassle for heirs.

A number of these issues can be avoided if families place their existing vacation home into a revocable trust, or make the initial purchase through one. That allows the parents to name their children as the ultimate beneficiaries without having to go through a lengthy probate process when they pass away.

At death, most revocable trusts become irrevocable trusts, which means that they cannot be changed without the permission of all the trust’s beneficiaries. This would prevent the home from being seized through any legal action brought against one of the beneficiaries. Meanwhile, a trustee and even a successor trustee can be named to manage the asset so that the home is maintained indefinitely — unless the money runs out or the heirs decide to sell. “The goal is to ensure that the house remains in the family for generations without having it become a potentially taxable asset in the estate,” explains Harvell.