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HIS, HERS . . . HEIRS
Estate Planning for Blended Families
By David Hoffman
Remember all of those TV shows about parents of children not
their own? There was the man with three sons who marries the
woman with three daughters, and the man with one daughter
who feels compelled to adopt two sons, and the single,
musical mother of 5 who takes in a 6th just to round out the
band. And so forth and so on. They were cute. They were
charming. They were legal nightmares. Why you ask? Well,
because of that little known footnote to every script, the
law of intestacy.
Let’s assume that the parents of the first “Bunch” did not
have wills, trusts, or anything else that even remotely
resembled estate planning. And let’s say that the dad died
first. Anything that was in joint name with the Mrs. became
hers. If everything was in joint name with the Mrs., it all
became hers. Even if our TV dad managed to keep something in
his own name, at least half of that became hers. And then –
and here’s the real football in the face - when she died,
all of it passed to her three daughters -nothing to the
boys. Why? Because the boys were not her “kin” and the law
of intestacy says that it all goes to her next of kin. So
who’s laughing now?
Of course, in the real world, nobody wants to leave a
child’s inheritance to chance. But, unlike a traditional
family, parents of a blended family usually have a more
difficult time deciding exactly what that inheritance should
be. Let’s take the “Bunch” type of family described above.
In such cases, one parent may bring significantly more
assets into the marriage while the other parent brings more
children. A particularly amicable couple may decide to
simply pool what they’ve got and divide it evenly among all
of the children; even though that will almost certainly
result in the poorer kids getting richer and the richer kids
getting poorer.
On the other hand, such parents may choose to earmark their
separate estates for their respective children. Typically,
these estates are described in terms of what each spouse
owned on the wedding day plus half of everything acquired
thereafter. The trick is tracking assets that, over time,
tend to lose their identity. It can be done, but it requires
carefully worded documentation and a considerable amount of
accounting discipline.
Furthermore, our “Bunch” could be a staggered type of
family. This is the case where one spouse, let’s say the
husband, has children by a prior marriage as well as
children by his second marriage. For his new wife, however,
this is her only marriage and these are her only children.
Matters are complicated further if the children from the
husband’s first marriage are considerably older than his new
progeny. In such cases, no matter how they decide to divide
the estate, such couples almost always choose an estate plan
that delays the distribution of shares until the youngest
child is raised and educated.
Because blended family estate plans can last for decades,
the only practical vehicle for implementing any of them is a
living trust. Aside from providing for the children, a trust
provides a home and financial security for the surviving
spouse as well as probate and tax avoidance for the family
as a whole. A prenuptial or postnuptial agreement can be
used in conjunction with the trust to prevent the surviving
spouse from amending her stepchildren right out of the plan
- as well as to secure the inheritances of all of the
children against future step-parents.
As if all of this were not enough to consider, there is yet
one more problem unique to blended families. The terms of a
divorce decree may require a parent to bequeath all or part
of his estate to the child of a prior marriage or provide
that child with life insurance. The terms of the trust would
need to take such obligations into account and provide for
different distribution schemes depending on whether or not
such obligations have been met.
Sitcom families have one great advantage. They are cancelled
long before anyone has a chance to die. I have often thought
about those Tennessee mountain people who struck it rich and
moved to California. As far as I could tell, the patriarch
was the father of the young woman but the uncle of the young
man. There was a granny in there, but it wasn’t clear
exactly whose grandmother she was or if she was even related
to any of them. On top of it all, there was all manner of
critters, which for all I know may have had rights in
California. I guess we will never know who would have gotten
how much if any one of them had predeceased the other. And
that is sad indeed because, in the end, it wasn’t just a
show, it was a bar exam question.
David Hoffman is a Virginia attorney who limits his practice
to wills, trusts, probate and estate taxation. His offices
are located in the northern Virginia suburb of Fairfax City.
703-267-6100
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