I was recently asked the following estate planning question by a nice couple who had moved to Alabama.  I thought the question and the answer would be beneficial to my blog readers.  In this case, the information could prove helpful whether your estate plan is for Alabama or not.

Question: My son is 100 percent disabled and is currently receiving benefits for Social Security disability and Medicare. We want to leave our assets to him after our deaths. We want the funds to be administered by our daughter, whom we hope to have as his caretaker after our passing. Is there a way we can go about this so that the proceeds from our estate will not interfere with his income from disability and his Medicare benefits? We also would like for our daughter not to be required to pay income taxes on money that will go to our son.
Answer: Before doing anything about your assets, will, trusts, etc., you should seek the services of a competent estate planning attorney. It very well could be that if the money is left to your son, his benefits may be endangered. That would be tragic. There are ways to plan for this, perhaps through a Special Needs Trust.

However, you mention that you “hope” for your daughter to become his caretaker. Have you discussed the matter with her? These are all things that need to be taken into consideration. The actions you take will have some bearing on whether or not taxes will be paid. Again, this is a clear case for a competent estate planning attorney, who you should have a consultation with before making any definite decisions.

Question: I have a will leaving everything I own, including a substantial inheritance from my mother, to my husband. However, I have two adult children from another marriage and I want to ensure that they are also provided for. I have a verbal agreement with my husband that if I am the first to pass away, he will use his judgment to distribute assets to my children and name them as beneficiaries of his own will. Is this enough to provide for them?
Answer: No! In fact, your current plan is a recipe for disaster, since your husband has no obligation to distribute anything to children from your other marriage.
Your husband could remarry after you pass away and end up leaving everything to the new wife, moving your assets out of your family. Or, he could leave more of the assets to his own children and not provide as much to your children as you would have liked. It could cause your children to feel that you didn’t care about them enough to leave part of your legacy to them.
Even if that scenario doesn’t take place, your husband’s own estate plan could be jeopardized due to the federal estate tax. After his death, if the combined value of both of your assets exceeds estate tax exclusion amounts, his estate could be subject to estate taxes (which means the assets you left to him will be taxed as  part of his estate.

This potential disaster is not difficult to avert. Here’s one possible solution:
Establish a revocable living trust that would hold the assets during your lifetime. This would remove them from probate which would simplify and expedite the transition. The language of the trust can say that after you pass on, some assets are to be left outright to your children or in a trust for their benefit.
Any remaining assets could be left in a trust for the benefit of your husband, allowing him to receive income from the trust and be given the discretion to distribute principal if necessary. Upon his death, your children would have the assets distributed to them.
Your desire to ensure your husband is provided for would be honored by this solution, but wouldn’t allow him unlimited control of the assets.