Stepfamily Estate Planning: Do you have a will?

11 11 2010

Hi Jacque: Your book and emails have been so helpful to me over the last couple years, and I’m happy to report that I’m getting married next month to a wonderful, wonderful man (who happens to have two young sons). Thank you for sharing your wisdom and compassion and helping me feel comfortable with the unexpected path toward stepmotherhood that my life has taken!

I do have a question for you that I’d love to see addressed (and love to get other stepmoms’ feedback on). My fiance and I haven’t had a conversation about wills, and as much as I don’t want to be thinking about that right now, it does seem like something we should do once we’re married. So I’m curious: how do most stepfamilies handle inheritance issues? My assumption is that most married couples who have children together only pass on an inheritance to the kids once both parents have passed away. Is that the norm with married couples when stepkids are involved, too? If – God forbid – something were to happen to my fiance, the last thing I’d want is to end up with financial difficulties or to start fighting with the ex about how much the kids should be getting. I certainly would want to fulfill my fiance’s goals as far as funding his kids’ college educations, but I’m not sure if/how that should get codified in a legal document. What should we be thinking about as we start talking about wills?

Congrats on your upcoming wedding! You are so smart to ask about this. Estate planning is a challenge no matter when you discuss it, but it is absolutely critical. And just because you get things down on paper now, remember there is plenty of time for you to change things later on if your heart or your circumstances change. I HIGHLY recommend finding a professional estate planning attorney to help you do this. Make sure to ask if they are experienced with stepfamily issues and you can educate yourself beforehand with some of Marjorie Engel’s wonderful work on stepfamily financial issues.

Instead of guessing, work with a financial planner, also well-versed in stepfamily matters, who can help you determine the amounts of life insurance you’ll need, retirement, college savings, etc. Just going through the process of working on all of this is a wonderful way for you and your partner to work through some of these challenging issues. If you have children from a previous marriage or you have a new baby together, you’ll need to discuss how you both want to take care of your children.

You make an assumption here that assets are only left to the children once both parents have passed away. Though that certainly does happen, it’s not always the case. In a stepfamily, if dad dies before you do, things can get extremely complicated. This is the stuff legends are made of. You need to be taken care of but dad might want his childrens’ needs addressed as well. Some divorce decrees state that a portion of or all of Dad’s life insurance will go to his children directly or to support his children. What does your husband’s (or your) divorce decree state?

You have no legal relationship to the stepkids when Dad is living or when he’s gone. We found out that in Minnesota if my husband and I both died in a car crash, the state makes the assumption legally that my husband died first. That means his assets are transferred into my estate, which means that our biological daughter would inherit everything and my stepchildren would get nothing of their father’s estate, UNLESS we specify our inheritors in our wills or set up a trust to handle the life insurance payouts.

SO. To answer your question. It is CRITICAL to have your estate planning done when you’re in a stepfamily. Though it can be extremely difficult to have the kind of conversations you’ll need to have to get this done, just imagine how much harder it would be for the people you leave behind if you don’t do it. ICK. Plus if you don’t have a will or trusts set up to transfer your assets to the next generation, the government will step in and try to do it for you. You’ll estate will go into probate so the loved ones you left behind will have to pay to have the government tell them what it thinks you wanted to do with the money.

Not good. As I’ve mentioned in past articles and in my book, the laws are different in each state. Have I scared you yet?

I had a brief conversation about legal issues in a Stepmom Circles podcast with Stepfamily Law Expert Margaret Mahoney. It is in the archive so you can find it here.

All right, my ladies. Let’s discuss! Do you have a will? Have you looked at it recently? How do you work through some of emotional landmines with your partner?



2 responses

11 11 2010

When my partner and I merged households last year, we executed a cohabitation agreement, which essentially says that each of our separate property remains separate and whatever we each earn belongs to the person who earns it. We are now in the process of redoing (me) or creating (him) our wills and trusts.

My partner has two kids (20 and 15).  I have none. We are both self-sufficient financially. We live in my house, and his house is rented out. 

I think that his property should go to his kids when he dies. I didn’t help him earn it (he did that himself before we met), and I don’t need it (whereas his kids still need to get through college and first homes etc).  Perhaps years from now, after the kids have finished school and gotten established and we have spent more years than we have now supporting each other logistically to enable further professional success we might revisit that. 

For now, the real issue is identifying a trustee so that, if he dies and the kids inherit while the 15 year old is still a minor, their mom does not control the money. She has historically made very foolish financial decisions and would likely do the same with their inheritance. Even if the kids are over 18 when they inherit, there likely will be a trustee until they are older (30?) so that they won’t do whatever mom says and then be sorry later. I have asked to be excluded from the inheritance both because I don’t need it and because I think my credibility as a good financial decision-maker for the kids (especially if I end up being the trustee) will be higher if I am not also a beneficiary.

By the way, we are waiting to marry because: (1) his former wife has the right to ask for alimony at any time until she remarries and our state has a good, but not perfect, history of excluding a new spouse’s income and assets (that’s me!) from the calculation – a risk I am not willing to assume, and (2) when the kids apply for financial aid for college, the eligibility calculation includes the income and assets of any new spouse (me again) EVEN if the prenuptial says that the new spouse is not obligated to pay for college.  Point two is something that far too few people know before remarrying.  

12 11 2010

As a stepchild, stepmom and an attorney who practices in Estate Planning it is critical that you both discuss what is going to happen when one or both of you is incapacitated or deceased. There are tons of ways to deal with all of this. I have drafted wills and trusts for blended families of all types. It is all about doing what you and your spouse decide is right for you and your family. Please be aware that there is always a chance for anger and fighting when a parent dies, even for those families who seem so very close (you know the ones who you would never think would fight).

Not only talk about wills, but talk about what your wishes are for end of life, if you are incapaciated and need a guardian. These are areas that are also ripe for fighting (especially with adult children). All of these topics should be addressed when planning for your overall Estate. As hard as it is, make sure that the biological parent has a conversation with all adult children as to what their wishes are in terms of long term care, or end of life.

Good luck to all who are taking on this endevor… remember you can make a plan now and it can always be changed as circumstances change.

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