Issue 48.11
In a “traditional” estate plan, each spouse provides for his or her assets to pass to the surviving spouse, with the understanding that the assets will go to the children at the surviving spouse’s death.
This may work well when the spouses have only been married to each other, but it can spell disaster if your family is one of the many blended families of today. For couples with children from prior marriages, a better approach is to sort out what’s “yours, mine, and ours” and plan accordingly so neither your spouse nor your children are unintentionally disinherited.
Most people want to take care of their spouse or life partner. This means that if you die first, you want your spouse to be able to continue living in the house, to continue driving the car and continue to have access to the bank accounts. But the majority of people also want their own children or other loved ones to inherit something. Many people do not realize how easy it is to accidentally disinherit loved ones.
Children can be inadvertently disinherited by the use of joint tenancy deeds on real estate (or joint ownership of bank accounts). Here is a common example: Husband (“H”) and Wife (“W”) have two children. H dies. W remarries Second Husband (“H2”). W wants to show her love and commitment to H2, so she retitles the house into her and H2’s name as joint tenants with right of survivorship. She also changes the ownership of her bank accounts to be jointly owned with H2. Then she dies. The house and bank accounts suddenly belong to H2. W’s children likely get nothing.
The same result can happen if people in second marriages prepare estate planning documents that leave all to their new spouse with no provision for the children. If the new spouse inherits everything, the deceased spouse’s children often never inherit the assets.
Careful estate planning can provide peace of mind and valid solutions for blended families. Sometimes it is wise to accompany estate planning documents with a carefully-drafted marital agreement, which makes it more difficult for your spouse to contest corresponding provisions that you set forth in your will or trust. Here are some common characteristics of good estate plans that can resolve estate issues and protect your intended beneficiaries:
Use of Well-Prepared Trusts. A trust allows you to have significant flexibility and control over the disposition of your assets when you die or become incapacitated. Good estate planning can allow your spouse or partner to be cared for until his or her death, with assets (including your half interest in your personal residence) retained in a sub-trust for the benefit of your spouse (with your spouse having as little or as much control over the assets as you desire), then upon your spouse’s death, having your trustee distribute your share of the assets to your own children or to other beneficiaries you have selected.
Blended family estate planning does require extra planning and more thought and effort. However, when accomplished the completed estate plan provides peace of mind, knowing that you have provided for both your spouse or companion as well as the children you love.
Jeffery J. McKenna is an attorney licensed in three states and serving clients in Utah, Nevada, and Arizona. He is a partner at the law firm of Barney, McKenna and Olmstead, with offices in St. George and Mesquite. He is a founding member of the Southern Utah Estate Planning Council. If you have questions or topics that you would like addressed in these articles please email him at jmckenna@barney-mckenna.com or call 435 628-1711