Estate Planning Mixed Family Trap: The Forgotten Child Trap
Estate Planning Mixed Family Trap: The Forgotten Child Trap
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Estate Planning Mixed Family Trap: The Forgotten Child Trap

boys-young-mixed-raceMixed families, when at least one child comes into a marriage from a different parent, are not uncommon but require special treatment in estate planning. Some unfortunate outcomes have occurred when property gets passed down to everybody but the step-child due to unforeseen circumstances.

Wills are typically mirrored for current spouse, giving the surviving spouse all their community property, and assume that if the second spouse dies, the property will then be distributed to all of the children. The standardized clause in the will typically looks like "to my spouse, if he/she survives me, but if not, then to my children".

However, when a step-parent includes in a Will, to my spouse if then living, but if not to my children", the step-child is not part of "my" children for the step parent (unless formally adopted). So if the blood parent dies first, the property is not distributed to the step-child; an outcome that has consistently been upheld in Washington state and other jurisdictions.

Here is an example. Let's assume Mary and John get married. Mary already has a child from a previous marriage named Suzy, and John has a child David. Being responsible parents, the two go to their general practice attorney who suggests the normal routine provisions for both parents - if I die, I want my spouse to have all my property, and if he/she does not survive me, then to my children.

Fast forward and we can add Mary and John have a few children together, Paul and Stephanie. Unfortunately, Mary dies first in an unfortunate accident. As her Will described, all her property goes to John. At that moment, the property is John's and is no longer a party of Mary's estate. Suzy, who is a step-child of John, goes to live with her father.

John passes away sometime later. His last will still reads the same, that his property should go to his children. John already got all of Mary's property, so it belongs to him now. Since his Will mirrored Mary's, and marry died first, all of John's property will go to his children. So here we have result that Mar probably did not foresee. Paul, Stephanie and David all receive a portion of John's estate, but Suzy - the one child that has no blood relation to John and was never adopted by John, receives none of Mary's property. Sally's only inheritance, if any, will have to come from her father's side.

Parents and attorneys should proceed with caution less they unwittingly disinherit a child.

What's the solution? The first thing each spouse should do is include a clause in their own Will that upon death all property to which the dead spouse had a right to transfer should be placed into trust. Second, if you want your surviving spouse to be able to use or access any of the trust assets, the use should be made conditional. The condition being that should the spouse remarry, the spouse will lose all rights to the trust assets unless: (1) both the surviving spouse and the new person to be married must place all their separate property into trust prior to the marriage. (2) the couple must create a valid pre-nuptual agreement stating that all separate property must remain separate property, and any property obtained through the dead spouse's trust is agreed upon as separate property.

If all conditions are not met, then the surviving spouse loses all rights to the dead spouse's property. The property will then be saved for all of the deceased spouse's children.

It's important, if you have the funds, to find an attorney who primarily does estate planning to make sure that everything is done properly. Trusts are complicated and have very specific requirements that can change periodically. Lawyers who focus in estate planning are almost guaranteed to cost more, but save you and your family a lot more time and money down the line. Plus, you can build a life-long relationship with an attorney who will always be there to take care of you and your family.

Matthew Johnson is a Seattle area estate planning, bankruptcy, and probate attorney. Johnson Legal Group: http://www.johnsonlg.com/

 
 
 
 
 

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