Estate Planning for Blended Families
The Brady Bunch Breaks Down: Estate Fights Tear Stepfamilies Apart
- Wall Street Journal headline, June 1, 2024
According to that Journal article, the U.S. Census Bureau has determined that one in five opposite-sex couples who lived together in 2021 had a least one partner who had a child with a prior partner. That’s a lot of blended families, and a lot of potential estate planning conundrums. Blended families should benefit from comprehensive estate planning.
Some of the typical estate planning issues were illustrated in reader comments to that article.
“A situation occurred when my husband's father remarried after his first wife's death. The new wife was the same age and had grown children and had property that she got after being widowed from her first husband. They left everything to each other in their wills and I guess they expected each would do the right thing when the time came. The wife died first and my husband's dad inherited everything including the property. Then he remarried and left everything to his third wife. He died first so the family property from wife #2, that was supposed to go to her family, instead, went to this third wife. What a mess!”
“Things do get very ugly sometimes, even if there is an estate plan. People can be cruel to each other when money is involved. If any family member asks you to be executor or trustee, say no.”
“Grief may do something to people, but you learn a lot about someone by going through the probate process with them. When my father passed away, he had a freshly made will that left the bulk of his estate to his wife, my step-mother. His children watched as she became a shrew over every bit of his belongings and property owed to her. I didn't believe that she married him for the money until I saw this. Now I know it is probably true that if he had not had anything, she would not have married him. So, word to the wise...If you have any assets and are thinking about getting married, just consider the possibility, unbelievable that it may seem, that your beloved is in it for the money. Get a prenup. Leave your estate to your children. Your new spouse can leave his or her assets to her children.”
Estate planning is important for everyone, and the issues for blended families can be especially knotty. How can one be confident that one’s wishes for everyone will be implemented? The most flexible approach to preserving an inheritance for children, whether they are minors or adults, is a trust. The trustee can take subsequent circumstances into account in sprinkling the income distributions among the beneficiaries. An irrevocable trust also provides financial protection in divorce, bankruptcy and lawsuits. It can be a mechanism for supporting financial discipline and avoiding irresponsible spending and the waste of an inheritance.
Two more takeaways from this article;
“’Blended families should consider naming an outsider as executor or trustee instead of a relative, a biological child of one parent, or even one child from each side,’ said Paul Hood, a retired estate planner in Hazel Park, Mich.” That could be us. We serve as executor and trustee.
And one more comment from the article. “I have a rich friend (1 billion +). I casually asked him what his children are doing. "They are all waiters.". To my "Huh?" he replied, "They are all waiting for me to die".
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