Remember the Brady Bunch? Mike and Carol Brady were the blended family bringing three kids each into their new marriage, so then there were six! I wonder what their estate planning looked like. Did Mike leave everything to Carol? Did he believe she would then divide everything equally among all six children when she died? Or would she favor her three girls over his three boys? Maybe she would leave everything to Sam the milkman!
We all would like to think that Carol would “do the right thing,” but what if she didn’t? What if she never liked Mike’s boys? After Mike died, Carol changed her Will and left everything to Marcia, Jan and Cindy! End result: The fruits of Mike’s architectural career would pass only to her children, while excluding Mike’s biological children. It happens a lot more often than most of us realize. Any affection Carol (or Mike) displayed was just an act put on for the benefit of the new spouse’s offspring, always knowing that the step-kids would be cut out in the end.
In other instances, though, it happens slowly over time. As the years pass after Mike’s death, Carol and the boys grow apart. When she finally looks at her estate plan in order to update it, she excludes them since they haven’t kept in touch anyway. There are no bad feelings or ill will; they just grew apart.
It is estimated that more than half of U.S. families are blended, so follow these four pointers to protect your family and your assets:
1)
You need more than a simple will
A simple will is an accident waiting to happen. It completely opens the real possibility that your biological children receive nothing after you and your spouse are gone. However, if you still want to create an “I love you” Last Will and Testament that leaves everything to your spouse, you need to realize that your spouse has the full ability to cut your children out of his or her estate plan. They can leave all your assets to their children, their new spouse or anyone they want.
Instead, consider a trust that leaves assets to your spouse for their lifetime, with the balance passing to your children upon their death. This ensures that your spouse has access to the funds after your death, with whatever is left going to your children when you are both gone.
2)
Choose a sophisticated and experienced trustee
Who will make financial decisions about investing the assets and distributing them to your spouse after you are gone? There could be tension between what your spouse wants and what your kids want your spouse to have. Who will act as referee between them?
Plan for the possibility that your surviving spouse will remarry. A trust can ensure that the assets are protected in the event your spouse remarries.
3)
Consider leaving some assets to your biological children on your death
Don’t leave your kids sitting around waiting for their stepmother or stepfather to kick the proverbial bucket. This wait can cause all sorts of anxiety and animosity where your kids try to force their inheritance sooner than when your spouse passes. A little bit of something is better than a whole lot of nothing!
4)
Decide who will make health care decisions
This is ALWAYS a big question. It is not uncommon for stepparents to cut off access and information to their spouse’s children when the spouse has been hospitalized. But think about this: will your children prevent your spouse from visiting you if you give them the authority to make decisions on your behalf? Give this topic a lot of consideration and brainstorm with legal professionals for your best options.
In this day and age, it is not uncommon to remarry after a divorce or the death of a spouse. Often in these remarriages, one or both spouses have children from a prior marriage. These blended families can pose some challenging estate planning issues for the newlyweds no matter how old or young you are! If you die before your new spouse, how do you ensure that both your new spouse and your children from your first marriage are taken care of and receive an inheritance after you are gone? Who gets the house – your new spouse or your children? Will your new spouse be kicked out of your marital home when you are gone? How will your new spouse get by financially if you choose to provide an immediate inheritance for your children?
In a perfect world, you could leave everything outright to your new spouse and trust your new spouse to eventually leave the balance to your children through a Will. Unfortunately, your spouse may decide, for various reasons, to disinherit the stepchildren by simply changing his or her Will. Don’t think it could happen? Think about this scenario:
Bob and Betty are a married couple with three kids. Betty tragically passes away at a young age. Eventually, Bob meets and marries Jane. Bob and Jane set up reciprocal Wills leaving all of their assets to each other and then to Bob’s children. Bob dies shortly after due to a massive heart-attack, and Jane inherits all of Bob’s property.
A few years later, Jane marries James who has two children of his own. James moves into the house that Jane inherited from Bob. Bob’s children do not get along with the James. James convinces Jane to revise her will to leave everything to James and his two children upon her death. James outlives Jane and inherits all of the assets Bob left to Jane.
Do you think Bob ever envisioned James inheriting his assets? While Jane is taken care of in this scenario, Bob’s children were unintentionally disinherited by Bob.
SOLUTION: Bob (and Jane) could have their assets transferred to a revocable trust during their lifetime. They can amend or revoke the Trust at any time, so they are both free to change their minds while they are both alive. Upon Bob’s death, the trust would become irrevocable as to his share or interest in the trust. The trust will continue for the benefit of Jane and the benefit of Bob’s children, all without disinheriting anyone!! The Trustee could invest the assets to make them income producing and pay all of the income to Jane for the rest of her lifetime while preserving the principal for Bob’s children. Upon Jane’s death, the remaining principal of the trust would go to Bob’s children. If Bob wants Jane to have access to the trust principal, Bob could name an independent trustee who has the power to pay some of the principal to Jane if she needs it, or, if he wants, he can let Jane be in charge.
Some benefits of using a trust in this situation include:
• Adding spendthrift protection;
• Maintaining post-death control over assets; and
• Ensuring that you provide for both your spouse and children.
There are many options available under a Revocable Trust to suit your individual needs and goals. The central point is that, with proper planning, you can maintain control over your assets to prevent disinheritance of your children while still providing for your second spouse.
