Strategies for unique estate planning situations

Whether you have a blended family or a loved one with special needs, understand your options if you have special estate planning considerations.
Mother and daughter painting.

When it comes to estate planning, one size doesn’t fit all — especially for those with unique considerations.

Whether you’re remarried and have a blended family or are caring for a loved one with special needs, we will work with you and your estate planning team to help find solutions that address your unique situation.

Here are considerations to address unique estate planning situations:

In this article:

If you’ve been divorced, remarried or have a blended family

To ensure clarity and transparency, engage with an attorney and tax advisor who are well versed in blended families. Here are some trust solutions to consider:

Irrevocable Life Insurance Trust (ILIT)

An irrevocable life insurance trust (ILIT) can allow you to avoid including your life insurance policy’s death benefit in your estate for estate tax purposes. ILITs are a particularly attractive option for people with special estate planning considerations like blended families. These trusts can be drafted to ensure that proceeds from a life insurance policy go to specific beneficiaries, such as children from a previous marriage, even while a surviving spouse is still alive.

Qualified Terminable Interest Property (QTIP) Trust

A qualified terminable interest property (QTIP) trust is a common tool used by blended families, as they ensure that both surviving spouses and children from a previous marriage benefit from the grantor’s estate. With a QTIP, the surviving spouse is typically provided regular payments from the trust for the rest of their lives. When the surviving spouse dies, the assets in the trust then become the property of the trust’s designated beneficiaries, such as children from a previous marriage.

Learn more: High-net-worth estate planning: When to consider advanced trusts in your plan

If your spouse is not a U.S. citizen

If your spouse isn’t a U.S. citizen, they do not qualify for the unlimited marital deduction — the provision of federal law that allows an individual to transfer an unrestricted amount of assets to their spouse at any time gift and estate tax free. Consider the following if you are in this unique estate planning situation:

Lifetime gift rules

Current law allows you to gift $185,000 a year (as of 2024) to a non-citizen spouse without gift tax consequences, an amount that is indexed for inflation. That is in addition to the lifetime gift and estate tax exclusion, which is currently $13.61 million but is also set to revert to half the amount, adjusted for inflation, after 2025 unless Congress acts.

Qualified domestic trust (QDOT)

A QDOT allows a non-citizen surviving spouse to take advantage of the marital deduction on estate taxes for any assets placed into the trust, and it is often a great way to preserve marital assets for couples that include a non-U.S. spouse and may be subject to gift or estate tax.

Learn more: Giving while living: Make lifetime gifting a part of your estate plan

If you and your partner are not married

Unmarried couples are not afforded the same privileges as married couples in laws governing estate planning. As such, they must take special steps to ensure their wishes will be followed in the event of death or incapacitation. If you and your partner are not married, here are some actions to consider:

  • Make sure you and your partner both have a will, a durable power of attorney, health care proxy and a health care directive. For unmarried couples, these are critical legal documents, as they will allow you to dictate who will manage your financial affairs and honor health care wishes if you’re incapacitated or no longer able to make decisions for yourself. Some key things to understand about their use:
  • An advanced directive lets you outline your wishes regarding the kind of medical care you want if you’re unable to make decisions for yourself.
  • A will establishes who gets many of the assets currently in your name and who should serve as the guardian if you have any minor children.
  • Properly designate primary and secondary beneficiaries on your bank, investment and retirement accounts — and ensure that they are up to date because such designations often supersede directions in a will.
  • Know you won’t benefit from the unlimited marital deduction. If you expect the value of your estate to exceed the lifetime gift and estate tax exclusion of $13.61 million1, you may want to consider additional estate planning strategies to manage taxes on assets passed to your partner.
  • You won’t be able to take advantage of spousal qualified plan RMD rules: When inheriting pre-tax qualified plans such as IRAs and 401(k)s, you are generally required to take distributions every year or within 10 years of the year that contains the 10th anniversary of the original owner’s death depending on the situation. Individuals without spousal benefits who inherit a large amount of pre-tax assets can be pushed into higher tax rates during the years they are required to take distributions. Having assets distributed between non-qualified, Roth and pre-tax accounts can help reduce the impact.
  • Pay close attention to how you title assets: Shared assets should be titled either as “joint tenants with rights of survivorship” or “tenants in common.” Assets held as joint tenants with rights of survivorship will pass automatically to the other partner. Assets held as tenants in common will transfer according to the terms of your will.
  • Consider a living trust: If you and your partner each put some or all your assets to individual revocable trusts, you can name yourself as trustee and retain complete control over your affairs as long as you’re able. But if either of you becomes incapacitated, your successor trustee (usually your partner) would be able to step in and automatically assume the management of your property. In addition to avoiding your estate going through probate, a living trust can serve as the document to articulate how and to whom your assets should be transferred at death.

Advice spotlight

It’s especially important for unmarried couples to be diligent in regularly reviewing and updating their estate planning documents. Current estate law focuses on protecting the interests of spouses, which means there’s no presumption your estate will pass to your partner if you are not married.

Learn more: Why naming beneficiaries is an essential part of estate planning

If you have beneficiaries with special needs

If you have a child or dependent with a disability, they could need support for long after you’re gone. Here are some solutions designed for beneficiaries with special needs:

Special needs trusts

These trusts are designed to help pay for some of your dependent’s supplemental expenses — outside of what is covered through government support — without jeopardizing government benefits. As with other trusts, you can fund a special needs trust with a variety of assets: savings, gifts from other family members, lump sum contributions or insurance.

Second-to-die life insurance policy

One common way to fund a special needs trust is with a second-to-die life insurance policy, which insures two individuals and puts the death benefit into the trust when the second insured individual (usually the parent/guardian in this case) dies. Your designated trustee then uses those funds to provide assistance to your child according to your instructions (while adhering to government regulations).

Creating the insurance benefit within the trust allows other family assets the chance to appreciate and eventually pass to your other children. As with all trusts, it is important to work with an attorney familiar with disability laws and estate planning to make sure the trust is structured appropriately.

ABLE accounts

Like a 529 plan, an ABLE account allows a person with a qualified disability (that they had before age 26) to have money in a tax-deferred account where it can grow and supplement the beneficiary’s government benefits.

Other benefits of an ABLE account:

  • Offers a tax-advantaged way to save money for disability-related expenses of the account’s designated beneficiary.
  • Contributions may be made by anyone using post-tax dollars. Total contributions per year can be made up to $18,000 in 2024.
  • Contributions are not tax deductible, although some states may allow for state income tax deductions for contributions.
  • Maximum ABLE limits differ by state. For those recipients of Supplemental Security Income (SSI), a further balance limit of $100,000 exists; balances over that amount would cause SSI payments to be suspended until limits drop below that balance.
  • Like 529s, states administer the plans and determine investment options.

Learn more: High-net-worth estate planning: When to consider advanced trusts in your plan

A partner you can count on

No matter your special estate planning needs, we will work with you and your estate planning team to help identify the strategies that make sense for you and your unique estate planning situation.

Questions to discuss with us

  • What are my options to ensure certain assets go to my children from a previous marriage?
  • How can I ensure my non-married partner can benefit from my estate?
  • How can my estate support my special needs child without jeopardizing their benefits?