My husband and I have children from previous marriages. What or how do we prepare a will and living will so that the estate does not go to probate and waste time and our money? Also, how does wills work when one spouse passes away first in this situation?
First, let's clear up the documents and terms you use to get you started.
WILLS: You need wills to distribute assets on death. A very common approach for second marriages with children from a prior marriage is to leave assets in trust for your new spouse (or for your new spouse and children) and have an independent person (sometimes a bank) serve as trustee. This trust can distribute money in accordance with whatever standard you set to your new spouse (and even to your children). You really need an estate attorney that specializes in this work to get this done well.
LIVING WILL: This is a statement of your health care wishes and often goes hand in hand with a health care proxy which designates an agent to make health care decision. Sounds like you mixed up the living will with the living trust below.
LIVING TRUST: This is also called a Revocable Living Trust and by other names. The objective of such a trust is to manage assets during illness, etc. It can also be used to avoid or minimize probate. It is not essential to use to avoid probate, and probate is often misunderstood and hence people spend money on documents like living trusts instead of dealing with the real issues. Most probates are not costly, expensive or a big deal. You can often avoid probate using jointly owned assets, beneficiary designations and other techniques, as well as a revocable trust. However, a key to your planning appears to be making sure that assets on your death (or your spouse's death) pass into a trust that protects the surviving spouse and your respective children from prior marriages.
INSURANCE: You didn't mention life insurance, but it can often be a simple and great way to solve second marriage estate issues. Example: buy a term policy for say 20 years for $1 million payable to your kids from your prior marriage and leave your assets to your new spouse. Once the marriage is more stable you can evaluate the plan again. However, if something happens your children get more money, your spouse doesn't have to get into a conflict with your children from your prior marriage over dividing up assets.
TITLE TO ASSETS: Who owns what assets, how they are owned (title) and what beneficiary designation forms say will be critical to achieving all your goals.
Get an expert in your area to help with all these issues. If you want more on probate avoidance see Shenkman "Complete Probate Guide" or if you want more on living trusts (and a REAL balanced view of when and how to use them) see Shenkman "The Complete Living Trust Program". Both are published by John Wiley & Sons, Inc. Both are available on Amazon.com.
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