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Estate Planning With A Second Family In Mind

More and more people are getting married a second time and find themselves with two families. Estate planning for one family is hard enough, but it can be quite complex if you have a second one to provide for.

That’s why I thought it would be helpful for me to post this article I found on Yahoo Finance last week. It deals with the issues that families with a mix of biological children, stepchildren, first spouses and second spouses must face.

(Photo credit: Wikipedia)

If you find yourself in this position, you don’t want to leave your heirs from the two families to fight it out over who gets what. The article lists the six most important things to remember when estate planning for a blended family.

Here are the six things to keep in mind, at least as outlined in the article:

It depends on how long your family has been together. If you and your second spouse married when your children were still young, or you had children together, you are really one big family. You should proceed with your will as if all your children were your biological children and your second spouse is your first spouse. But if your children were teenagers or adults when you remarried, things are different. You may want to make separate provisions for your biological children and your stepchildren.
Make provisions for your second spouse, but first make plans to provide for your children immediately. They should not have to wait until your second spouse dies before getting an inheritance.
Make a plan for your home. If your children grew up in your home, they may have more of a claim to it than does your second spouse. If they never grew up there, it belongs to your second spouse.
Taxes are less important than family harmony. Equal distribution may trump taxes, If you leave everything to your spouse to save on taxes, your children won’t be happy.
Communicate with everyone, either one at a time or as a group. It may be uncomfortable, but it will work out better, especially if you tell them your ideas and ask for their input.
Make sure you have the right experts. The right estate planning lawyer and financial planner are critical. You may even need a family therapist.

Planning for blended families can be challenging. But each family’s circumstances are different. I would be happy to review the options that best suit your family’s particular situation.

Get Your Estate Plan Right

A column I came across in the Wall Street Journal the other day got right to the point when it comes to estate planning.

Last Will And Testament (Photo credit: Ken_Mayer)

Start out by making a will.

The column quotes a financial advisor from Illinois who says he has clients in their 40s and 50s who have never done a will.

But it says there is now a “growing urgency” among Baby Boomers to get their estate plans in order. And this is especially important for those who have children with disabilities.

The will, the column says, is the foundation of any estate plan. It says who gets what and appoints guardians for children or adult children with disabilities.

Without a will, the state will decide these things for you.

Estate plans may also include trusts in the will to take care of children and name trustees to oversee those trusts. Without a trust, the children would get their inheritance right away once they are of age.

A special needs trust is a must if you have a child with a disability who is unlikely to be able to support himself or herself, the column points out. If your assets were to go right to the child, he or she might be disqualified from government benefits. The trust gets around that.

One reason many parents delay setting up trusts is that they don’t know whom to name as the trustee. The column’s advice for these people: name someone and you can revisit it later if you want.

If the child is one with disabilities, you may want to consider naming more than one person to handle different duties for the child.

There are many things to think about. The message of the column — and of this blog post — is that you need to get on this if you haven’t already.

You never know what is going to happen in life. Better to be prepared.

Actor Hoffman Made Mistakes With His Will

I came across an interesting article recently about the actor Phillip Seymour Hoffman and how he made numerous mistakes in his estate planning that are going to impact his partner and kids.

I thought his story could serve as a cautionary tale.

Hoffman, who died of a drug overdose earlier this year, supposedly did not want to make “trust fund kids” out of his three children. That may be admirable, but the way he went about it will actually do harm to his long-time partner and kids.

According to the story on marketwatch.com, probate court documents reveal that Hoffman’s wishes were that his kids get no part of his $35 million estate and that all of it go to his long-time partner Mimi O’Donnell, the mother of his kids but to whom he was not married.

When a wealthy person dies, he or she can do one of three things: leave the money to their family; leave it to charity; or leave it to the IRS in the form of estate taxes.

Hoffman’s lack of planning maximized the IRS’s take with no benefit to his family or to charities.

While I understand the desire not to create “trust fund kids,” there are ways to do it so they do not become spoiled layabouts.

Now, about 40 percent of Hoffman’s estate over the first $5.4 million will go to the IRS because he and O’Donnell were not married. That’s $12 million.

Much of that could have gone to charities he cared about.

And the matter of no trusts for his kids? What about their education? He could have set up trusts to fund just that. Or trusts to fund medical costs if ever necessary. Or he could have set up trusts that kick in only if the kids accomplish certain goals or earn a certain amount of money on their own. Apparently, he did include his first child in his will, but not the second and third since they had not yet been born when he made out the will.

Another reason why updating wills periodically is important.

The Dangers Of Using Cookie-Cutter, Downloadable Legal Forms

When people learn that I am an estate planning and elder law attorney, some of them ask what I think about “do it yourself” wills, trusts, and other estate planning forms that can be found online. Of course, when I tell them that it is advisable to hire an attorney, it sounds rather self-serving.

Last Will And Testament (Photo credit: Ken_Mayer)

A recent article in the ABA Journal speaks to my concerns about the potential pitfalls and unwanted consequences of using downloadable forms. It discusses the case of a Florida woman, Ann Aldrich, who used an “E-Z Legal Form” to create her will in 2004. In the will, she left all of her assets to her sister, with the caveat that if Aldrich’s sister predeceased her, the assets would go to her brother.

Sounds simple enough, right? So why, then, did the Florida Supreme Court rule that Aldrich’s two nieces were entitled to part of her estate? Because the E-Z Legal Form failed to include what is known as a residuary clause providing for property not listed in the will. That is, assets acquired by Aldrich after 2004, when she made her will, were distributed according to the laws if intestacy. With regard to these assets, it was as if the will had never been created in the first place! Florida intestacy laws mandated that the nieces inherit these assets, not Aldrich’s brother.

One of the concurring justices in the case, Barbara Pariente, said: “While I appreciate that there are many individuals in this state who might have difficulty affording a lawyer, this case does remind me of the old adage ‘penny-wise and pound-foolish.’ I therefore take this opportunity to highlight a cautionary tale of the potential dangers of utilizing pre-printed forms and drafting a will without legal assistance. As this case illustrates, that decision can ultimately result in the frustration of the testator’s intent, in addition to the payment of extensive attorney’s fees—the precise results the testator sought to avoid in the first place.”

Thank you, Justice Pariente. I couldn’t have said it better myself.

Lessons In Estate Planning From Deceased Celebrities

Many of us think, “If I was rich and famous, I wouldn’t have a care in the world.” However, as the recent passing of two Hollywood stars shows us, when it comes to estate planning we all grapple with similar concerns and hopes for our loved ones.

Philip Seymour Hoffman won a Academy Award for...

Philip Seymour Hoffman (Photo credit: Wikipedia)

Consider the case of Phillip Seymour Hoffman, who recently died of a heroin overdose. His plan contained a provision requesting that his son, Cooper Hoffman, be raised in or near the cities of Manhattan, Chicago, or San Francisco. Why would he include such a provision? Hoffman’s Will stated, “The purpose of this request is so that my son will be exposed to the culture, arts and architecture that such cities offer.”

Phillip wanted to pass some of his values onto his son, and used his estate plan to make it possible.

Paul Walker (Photo credit: Wikipedia)

Or consider Paul Walker, the star of Fast & Furious who was recently killed in a car accident. He left his entire estate to his daughter, Meadow, with the provision that she cannot access the money until she becomes an adult. Paul also named his mother, not Meadow’s mother, as Medow’s guardian. Paul apparently felt more confident that his mother would be the better guardian and manager of Meadow’s newfound wealth.

Naming guardians, teaching our children proper values, determining “who gets what, and when.” These are difficult issues that all families face, not just celebrities.

I welcome the opportunity to help you make decisions like these and plan for whatever the future holds.

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