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Estate Planning for Second Families

Written by Tina Garbas-Tyrrell

Many of our clients have second families, and second families come in all conceivable varieties. A client may be in a second marriage that includes step children, and he may also have children from his first marriage. Another client may have a child from a first relationship for whom she is paying child support, and she may now be married for the first time with a second child. Yet another client may never have been married and has no biological children of his own, but he may have been cohabiting with his partner for over a decade and treat his partner's children as his own.

No matter what your relationship history is, proper estate planning can ensure that, upon your death, your legal obligations toward your current and former partners are met, your children's legal entitlements from your estate are satisfied, and your wishes for the distribution of your residuary estate are realized.

Estate lawyers are familiar with the necessary questions to ask that ensure nothing (and no one) is overlooked when drafting a will for someone with a second family. Two of these questions include:

Are You a Party to a Domestic Contract or Court Order?

If you have separated from a partner, whether or not you were legally married, there may be clauses in a Separation Agreement or court Order that have a direct effect on your estate planning. For example, you may have support obligations to your former partner that are binding on your estate. Most people in this situation carry life insurance with their former partner as the beneficiary to secure any support obligation, but your lawyer will need this information as well. Your lawyer will ensure that nothing is done in your new will to inadvertently change the beneficiary designation of any existing life insurance policies, in addition to adding any necessary clauses to your will to satisfy the terms of the existing agreement/Order.

You may have a Cohabitation or Marriage Contract with your current partner, releasing you from any possible future claims against your estate. This is essential information for your lawyer, as you do not want to include anything in your will that is contrary to the wishes expressed in your contract, or that creates any ambiguity in your estate planning. Alternately, you may have agreed in your contract to execute mutual wills (meaning both parties execute wills with the same terms), and you want to ensure that you are in compliance with your contract.

Are You and Your partner on the Same Page Re: Children?

Example: Bob and Mary have been married for fifteen years and amassed the majority of their wealth while married. Bob has two children from his first marriage, who are now adults. Mary has three children from her first marriage, who are now adults. Bob and Mary have agreed that whomever dies first wants everything to go to the surviving spouse; however, they have concerns about what happens after that...

Many clients express concern about what will happen to their "own" children (their spouse's step children) after their death. To use the example above, Bob might ask what happens if he dies, his estate goes to Mary, and Mary then changes her will leaving everything to her biological children, cutting out his children altogether? What if Mary gets remarried after he dies, meaning that Mary's new spouse may have a claim to her estate? Is it fair to split their estate evenly between the two sets of children, with half to go to Mary's two children and half to go to Bob's three children (even though Bob's two children will get more money split two ways than Mary's children, which splits three ways), or it is fair for each child to get one fifth of the estate?

When presented with these questions, clients are often surprised to find that they feel differently than their spouse on these issues. There are several estate planning options available to clients to address these concerns, some of which include:

  • Setting up a testamentary spousal trust to ensure her or his spouse is cared for during her or his lifetime, but then having the remainder upon the spouse's death going to the children. It is important to note that tax rules regarding spousal trusts have recently changed, and your lawyer will be able to advise you as to the benefits and drawbacks of a trust, based on your individual situation.
  • Executing irrevocable mutual wills, meaning that both parties will agree to the terms of the will and bind the other to those terms, by way of a contract, even after the first party passes away. This option can be complex, but it is a viable option for some couples.
  • Setting up inter vivos trusts (trusts to operate during the testator's lifetime), having certain assets bypass your estate altogether
  • Putting specific assets into joint ownership during the testator's lifetime, so that upon her or his death, the asset will vest completely in the joint owner's name by right of survivorship. This option comes with its own risks and benefits, and steps need to be taken to make clear whether the change of ownership is intended as a gift or the property is intended to be held in trust by the joint owner, but it is a valid and viable estate planning option for some people.

Conclusion

Estate planning when you have spouses (commonlaw or legal), former spouses, biological children, and step children in the picture needs to be done thoughtfully and carefully. This post includes only a few of the questions and concerns that our clients with second families raise in meetings, but estate lawyers are able to guide clients through these issues and assist in drafting documents that address them in a manner that is legally sound and that brings clients peace of mind.

Remember, everyone's situation is unique. The blogs posted on this site are informational. They are not intended to be taken as legal advice for your situation. It is always a good idea to seek professional legal advice before making any decisions related to your particular case.

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