Q: How do my fiancé and I set up our financial plans and estate plans when he has a minor child by his late wife?
My fiancé and I live in California and are about 40 years old. We hope to marry and have children soon. He has one living ten year old son by late wife. I will likely need to reduce or even quit work to care for his child once we marry. My fiancé has significantly more money, including retirement funds, and owns real estate. He also has debt. I’ve never married and have no children. I don’t own any real estate but have little debt. Most of my money is in my 401K. Fiancé wants to keep his current real estate (currently about 1/3 value of his assets) separate and set up will and trust, so his son will inherit it as his mother’s portion. He says we can save to buy joint real estate. I’m concerned this plan is too complex, and that over the years, joint money will end up being spent on his properties. Also, how do I maintain and build separate assets for any children we have together (or me or my family)? I want to be fair to his son but also fair to myself and any future children.
A: When a couple sets up a trust, each person gets to say to whom the person wants his/her/their half of the community property and all separate property. The other person gets to say who wlll receive his/her/their assets (again that person's half of the community property and all separate property.) So, if you wanted to leave your assets to a charity and your husband wanted to leave his assets to his child, you both could do that. If you buy real estate, be careful how it is titled. For example, if you title the property in joint tenancy, after the first person (your husband or you) passes away, the survivor will automatically get 100% of the real estate REGARDLESS of what the trust says. Many lawyers, such as myself, offer free initial consultations in which they explain the differences between trusts and wills, so contact a lawyer for more information about your specific situation. Best wishes and congratulations on getting married!
A: I agree with you that as a new couple, you need a financial plan to be put together with the assistance of a financial planner. I also recommend a pre-nuptial agreement aka "prenup" to address your commingling and financial planning concerns. Prenups are typically handled by family law attorneys, however an estate planning attorney can draft a good Prenup as well. Which brings me to my next suggestion, which is to put together an estate plan that provides for you, your husband, his child, and any other children that you may have.
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