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'Split-Level' Families Face Unique Estate Planning Challenges

  • September 28th, 2006

With the proliferation of families in which there is a substantial age difference among the children -- so-called "split-level" families -- attorneys and financial advisors are increasingly dealing with a set of unique estate planning problems. An article in the Wall Street Journal describes some of planning problems such families face and the solutions estate planners have devised.

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.

"When you have a second marriage, the kids from the first marriage always are at risk of losing their inheritance," says Jere Doyle, senior vice president at Mellon Financial Corp. in Boston.

In addition, 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.

To deal with such problems, many financial planners have turned to the use of trusts. Parents of split-level families customize their trusts to pay for the specific needs of their differently-aged children. Usually assets will go into the trust, and the surviving spouse will receive income from it. When the spouse passes away, the remaining assets in the trust will be divided among the children. Trusts also have the added benefit of limiting tax liabilities, which further ensure that money will go to the intended children.

Split-level parents must also think about the education and guardianship of their younger children. One solution is for an older sibling to take on guardianship responsibilities of a younger child. According to the U.S. Census, of the 56.1 million children who lived with siblings in 1996, 2.1 million lived with at least one step-sibling and 7.8 million lived with at least one half-sibling.

To read the Wall Street Journal article, "Estate Planning Is Tricky For 'Split-Level' Families" (9/12/06), click here (subscription required).

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Jean Ball

Hale Ball Carlson Baumgartner Murphy PLC
Fairfax, VA

John Laster

Law Offices of John L. Laster
Falls Church, VA

Judith Mitnick

Needham Mitnick & Pollack, PLC
Falls Church, VA


Last Modified: 09/28/2006

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