Inter vivos trusts: Protecting a spouse in a blended family

Blended families, where one or both spouses have children from previous relationships, bring unique challenges to estate planning.
Inter vivos trusts: Protecting a spouse in a blended family

One option to mitigate their inherent risk is an inter vivos trust, which can provide for your spouse while leaving other assets to your children. But what exactly is an inter vivos trust and how can you use it?

An inter vivos trust is also known as a living trust. Like other trusts, it involves an arrangement in which one party (the settlor) transfers assets to another party (the trustee) for the benefit of a third party (the beneficiary). In the context of estate planning in blended families, you, as the settlor, can create an inter vivos trust to provide for your spouse while also securing assets for your children from previous relationships.

Advantages of a Spousal Inter Vivos Trust

Creating an inter vivos trust can allow you to financially provide for your spouse and account for the complexities of a blended family. While there are downsides, it can help by:

Securing Financial Support: By designating your spouse as the primary beneficiary, you confirm your instruction for them to receive financial support from the trust after your passing.

Protection for Children: By naming your children as contingent beneficiaries, you secure their inheritance, assuring that they are provided for once your spouse’s needs are met.

Asset Management: The trustee, chosen by you, will manage the trust assets, ensuring they are distributed in accordance with your wishes and the trust’s terms.

Peace of Mind: Planning ahead in general can create peace of mind. Many of my clients are concerned that their spouse and children will fight over their assets. A trust can be one way of removing that conflict and hopefully leaving both your spouse and children in a better position down the road.

Steps to Creating an Inter Vivos Trust in BC

First, while this is a basic breakdown, trust law is complex and any arrangement should be done with the assistance or at least advice of a lawyer. 

Choose Your Trustee: Select a trustworthy individual or professional trustee who will be responsible for managing the trust assets. This trustee will play a crucial role in ensuring that your spouse’s and your children’s interests are protected.

Designate Your Beneficiaries: For this type of trust, you would designate your spouse as the primary beneficiary. This ensures they receive the financial support they need after your passing. You can also designate your children as contingent beneficiaries, in the event your spouse predeceases you.

Draft the Trust: This is the legal document that outlines the terms and conditions of the trust. Your trust documents should be carefully crafted to specify how the assets should be managed and distributed, taking into account the needs and rights of both your spouse and your children.

Transfer Assets: You transfer assets into the trust, which will serve as the financial source to provide for your spouse and, eventually, your children. This step requires careful consideration of the assets you want to include in the trust.

In Conclusion

Estate planning can be complex, particularly if you have a blended family. The above article only talks about one possible strategy and this type of planning should be completed with the assistance of a lawyer. Often, there are intersections of different issues that will create even more issues. Getting appropriate advice can be the best way of navigating them. 

Find out more about our estate planning services and book a consultation here.

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Disclaimer: This blog post is for informational purposes only and should not be construed as financial or legal advice. Consult with qualified professionals to create a personalized estate plan suitable for your specific circumstances.

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