We are long past the time when most husbands and wives got married for life and had one set of kids. High divorce rates mean many couples wed multiple times and have children with different spouses. There are also same sex couples and couples who choose to never marry. These scenarios significantly complicate estate planning and can lead to conflicts and resentment within families if not handled correctly. The biggest issues tend to arise in these situations:
Unequal treatment of children. Parents aren’t obligated to treat each child equally and there are many reasons why they may choose to leave more money to one child or another. One child may have a greater financial need or may spend more time with mom and dad, so the parents are considering an unequal distribution to reflect those circumstances. Even unconscious bias can come into play. For example, a parent may feel more comfortable leaving a business to a male child or the oldest child. Whatever the reason, an unequal inheritance is very likely to result in conflict and potentially lawsuits if not addressed appropriately. These are some of the issues that will come up when engaging in proper estate planning. Addressing them before death will avoid costly controversies upon death.
Accidentally disinheriting children from prior marriages. In a second marriage, each spouse may leave all their money to the other spouse with the agreement that the surviving spouse will leave money to the deceased’s children from a prior marriage. However, the survivor may not do that either accidentally or intentionally, leaving those children with no inheritance. There are appropriate arrangements that can be incorporated into an estate plan to address this situation.
Role of spouses. When leaving money to a loved one, you may want to consider protecting it with a trust to ensure the spouse of your heir won’t get the money in the event of a divorce. Be prepared that some heirs or spouses may be upset about this choice. Another problem is that once a divorce has occurred, it is important for both former spouses to review and update legal documents to avoid giving the ex-spouse legal rights or obligations. Other family members may also want to review their documents if they named the former spouse as a beneficiary or trustee in their estate plans.
Same sex couples. Laws recognizing same sex marriage mean that couples can take advantage of estate planning strategies such as the ability to leave unlimited amounts of property to their spouses without incurring estate tax, use of a Qualified Terminable Interest Property or QTIP trust, and combining the couple’s estate tax exemptions. However, along with this, couples and their families must consider the issues raised under the Roles of Spouses section above. In addition, be mindful of issues such as the adoption of children.
Business succession planning. A family business can often lead to conflict. Even before the head of the business retires or passes, there may be disputes over when he/she should step down and who takes control. The estate plan should address how to give heirs working in the business and those who don’t their fair shares.
The solution to these problems lies in getting experienced legal representation as well as family communication. The best way to avoid or at least minimize the quarreling is to be proactive in thinking through these issues. Make sure all your estate planning documents are complete and up-to-date. In addition, document and communicate your decisions to your family beforehand but do it in a structured way using an attorney and mediator to help. Remember, blood is thicker than water and money is thicker than blood!
We empower clients with our attorney/mediator services, helping them resolve disputes involving wills, caretaking, guardianships and other family conflicts. If you need assistance with your estate planning or long-term care plans, contact me for a consultation.