In this May 2026 market update video, Ty Bernicke, CFP®, President & CEO, walks through three estate planning problems that most families never see coming until it’s too late. If you have a blended family, a child who struggles with money, or kids living in certain states, this one is worth a few minutes of your time.
Full transcript:
Hello everybody. I’m Ty Bernicke and today we’re going to shift gears a little bit from the typical monthly market update to talk about three uncommon estate planning problems you should be aware of. And the reason I want to talk about these three different problems is because they’re frequently things that people don’t think about when they’re going to get their estate plan done.
Therefore, they don’t convey these potential problems to the estate attorney, and the problems can persist in that chain of events.
Problem 1: The Remarriage Asset Trap
So the first problem we’re going to talk about is the remarriage asset trap. And to illustrate how this works, I’m going to use an example. Let’s say we have Mark and Jane, who are married for many years, and Jane passes away and she leaves Mark $1 million of their estate that they had.
So I’m just again, using a very simple example. And Mark remarries Brenda. And Mark has two children from his previous marriage with Jane. Brenda has two children from her previous marriage and coincidentally, for simplicity again, Brenda has $1 million that she brought into the marriage. Mark has his $1 million he brought into the marriage. So combined they have $2 million and it is agreed upon verbally between the two of them that when when they both pass away, they’re going to split all their assets to their four children.
So Brenda’s two children from her first marriage, Mark’s two children from her first marriage. But Mark passes away. Brenda Harris. All $2 million and Brenda changes the beneficiary designations so that everything goes to her two children, and Mark’s children get nothing. And again, the reason I wanted to talk about this is because it is a preventable problem. A competent estate attorney can develop trust that ensure assets continue to your children.
This this plan could be developed during Mark’s first marriage or you can do it during the second marriage. You can even have provisions to ensure the spouse of the second marriage has ample income from a trust that you can develop with in a state attorney that will leave the residual value to Mark and Brenda’s children equally, or in whatever amounts you predetermined together.
And there’s an unlimited variations of how you can put this plan together.
Problem 2: Protecting Assets from Overspending
The second problem is how to prevent your children from blowing their inheritance. And I will say this that it’s extremely rare that we have people that retire and end up spending their entire nest egg in a short amount of time. It is not uncommon for a child to inherit money and blow through their inheritance in a short amount of time.
And I think it all comes back to that old saying, easy come, easy go. And I believe this is especially true for if you’re in a situation where you have a child that has a spending problem or a money management problem before receiving the inheritance, it gets amplified once they receive the inheritance. So a potential solution to this problem is to work with an estate attorney that helps you develop a trust that includes spendthrift provisions.
And I’m going to use an example to illustrate how this could work. Again, I’m going to use a very simple example. So let’s say somebody has a $4 million estate. They have two kids, the responsible child. And the child that has money management problems will call them the spend spendthrift child in this example. So in this situation you could give $2 million to the responsible child and they can take money out without any restrictions.
They can do whatever they want with that money, the spendthrift child. You can actually limit the amount that can come out of their inheritance. If you create a trust with an a state attorney in advance and you can, there’s a host of different reasons as to why you can have that spendthrift child take money out. If they have a health care emergency that comes out, you could you could put provisions so that they could take money out in the event that that thing happens, if they’re purchasing a first home, you can put a certain limit on how much they can take out of their trust to buy that new first home.
If you want to limit a percentage that can be withdrawn annually, you can do that. You can even have a monthly amount that’s predetermined come out each month, and if you wanted to, you could adjust it for inflation. Pretty much anything you can dream up, you could you can do with a competent estate attorney. If you develop this trust in advance of leaving that money to the spendthrift child.
Problem 3: Community and Marital Property States
The final problem that I want to talk about is marital property and community property states. So if you have children that live in Alaska, Arizona, California, Florida, Idaho, Kentucky, Louisiana, Nevada, New Mexico, South Dakota, Tennessee, Texas, Washington or Wisconsin. Those children are living in a community property state, or a marital property state. And again, I’m going to use an example to illustrate what could happen to help you understand how you could prevent this problem from occurring.
Let’s just say you had a daughter named Becky who is married to your son in law, James, and you leave back in investment account of $1 million in your estate plan. And Becky invests this money into an account with James. So now they have a joint account. And it’s not uncommon at all for when children who are married that and receive money from their parents to open a joint account with their spouse.
Now, we’ll assume that Becky is in one of those marital property or community property states, and we’ll assume that over time. Back in, James, add more money into this account, and sometimes they take money out of the account, but they use it for normal marital, purchases during the course of their course of their lives. And then sure enough, back in James get divorced now that they get divorced.
This if their divorce goes to court, it’s up to a judge to determine how that money is split. In a worst case scenario, that money could be split 50% to Becky, in 50% to James. And so Becky ultimately could lose up to half of her inheritance. Now, the solution to this problem is to protect this inheritance for Becky.
And you could do this by setting up trust trust provisions in your estate plan that ensures this money stays with Becky, regardless of her marital status.
Closing Thoughts
So again, these are three different problems that we have commonly seen over the years that we’ve been in business. And I wanted to share them with you so that if this is a if any of these three problems are a concern to you, talk to your financial advisor here and we can help you determine a potential referral to an estate planning attorney that can help provide you a solution to one of these three problems.
That is this month’s monthly market update. Once again, I’m Ty Bernicke and I appreciate your time today.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.
Individuals showing a CFP® designation hold an active CERTIFIED FINANCIAL PLANNER™ certification. To earn the CFP® designation, the individual had to complete an approved educational program, pass a rigorous examination and meet stringent experience requirements. Designation holders also adhere to a professional Code of Ethics and fulfill annual continuing education requirements to remain aware of current planning strategies and financial trends. You can find more information about this designation at CERTIFIED FINANCIAL PLANNER™ (CFP®) Certification.
