Many people need to rethink their families’ financial future as a result of second marriages or later-in-life pregnancies. Whether they have the same parents or not, a significant age difference between siblings is now termed a ‘split- level’ family.  ‘Split-level’ families usually occur when parents divorce and one of them remarries and starts a second family. Children past college age could have half-sisters or brothers who are toddlers.

Children born many years apart –the oldest children past college age and the youngest just born, makes estate planning more complicated. It requires careful planning to make sure assets get distributed to a spouse and children the way you intend, and with minimal tax disruption. Fortunately, trusts, life insurance and good communication can help achieve those goals, and prevent some of the most troublesome issues.

Parents need to decide potential education, living arrangements and guardianships. Distributing the assets equally, isn’t always the best choice because you have to think about what expenses the children incur. Substantially younger children will have a different set of needs, such as tuition and orthodontic work, than older children. Equal distribution of an estate may not be appropriate.

One question is whether to name an older child as a guardian for a younger child. It really depends on the relationship between the two, and maturity of the person you’re naming. Estate planning for children from different marriages requires careful planning, especially if one of the spouses is much younger.

The challenge is to ensure that the surviving spouse and younger children get adequate resources without inadvertently leaving out an older child. When you have a second marriage, the children from the first marriage always are at risk of losing their inheritance.  As a result, it isn’t unusual for the deceased to leave everything to the surviving spouse, who may later decide to leave the estate to her own children.

One of the best ways to accomplish this is through trusts. The trusts can even be used to encourage certain behavior, for example stipulating that certain conditions, such as completing graduate school be met.  Many people use a qualified-interest property trust, known as a “QTIP”, to ensure all their children get an inheritance. The assets go into the trust, and the surviving spouse receives income from the trust.  The beneficiaries of this trust, which can include children from the first marriage, receive the principal or remainder after the spouse dies. It simply takes wise planning.  Be Educated! Be Proactive!