Cents and Sensibility
Cents and Sensibility
If you've gone through a divorce or your spouse has died, and you're considering remarriage, you'll have a lot of emotions to contend with. But you'll also have to approach your financial plans with a cool head -- especially if you want to protect the interests of your children. Remarrying? Protect
your kids’ interestsTo begin with, maintain clear communications with your soon-to-be spouse. Let him or her know that you want your children to get the proper share of your assets when you die. Then, take the right steps.
Start by reviewing all the beneficiary designations on your investment contracts, IRAs, 401(k), life insurance policies and other financial documents. If you want your children to have access to these funds, make sure they are named on the document, either as a primary or a secondary beneficiary, depending on your preference.
It's essential to get the right beneficiaries listed -- but it's still not enough to assure that your children get everything you want them to have. For that to happen, you may want to explore more sophisticated legal arrangements, one of which is called the qualified terminable interest property (Q-TIP) marital trust. This type of trust can give your surviving spouse access to your assets while he or she is alive. The trust is "terminable" because your spouse's claims to the property will end upon his or her death.
Once your spouse dies, the trust's remaining assets will be distributed according to your directions, so your children can now get the money.
Your surviving spouse gets all the income from the Q-TIP marital trust, and also may get principal. To ensure a steady income stream, you may want to fund your trust with dividend-paying stocks and fixed-income investments -- such as bonds -- that make regular interest payments. A Q-TIP marital trust has other advantages. For example, assets inside the trust can't go to anyone else while your surviving spouse is alive and your spouse cannot change the beneficiary.
Once you've put all the pieces in place, you'll know you've established a good plan to meet your children's needs. And that may be the best wedding present you can give yourself.
Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at: gsteele2@pixi.com