Justin, My wife and I both have children from a prior marriage. When one of us dies, we want to make sure that the survivor is taken care of, but we also have property we consider separate. We want to make sure each of our separate property winds up with our own children when we’re both gone. Is there a way to do that? – Ted
Ted, that’s a great question on a confusing topic. It is possible to do exactly what you described with a properly drafted trust. Without planning, the situation could be a real mess. Most couples set up their estates so that everything passes from one spouse to the other when the first spouse dies. In other words, without proper planning, everything winds up solely in the name of the surviving spouse.
That may not immediately be a problem; however, when the second spouse dies, the children of the first spouse have no inheritance rights unless the second spouse adopted those children. Through no intentional wrongdoing, one set of children could accidentally be disinherited just by operation of Arkansas law. Of course, in such a situation, it is also possible for a surviving spouse to intentionally disinherit a deceased spouse’s children.
With a properly drafted trust, all assets belonging to either spouse can be titled in the name of the trust and made available to the surviving spouse with whatever restrictions that couple may wish to include on the use of the property. But the property is not solely owned by the surviving spouse when the first spouse dies—it remains in the trust. The trust then contains instructions for dividing the property among all the children at the death of the second spouse in accordance with the couple’s wishes.