All people in their midlife should have an updated estate plan, especially if you have a blended family. Though anyone in their midlife without an estate plan is at risk for many complications, it is crucial that any parent of a blended family updates their estate plan as soon as possible. If this does not happen, you are putting yourself and your loved ones at great risk of an unintentional disinheritance of either your spouse or children.
We are going to read about three possible scenarios that can happen in the failure of updating your estate plan, or even missing specific and necessary implications within your estate plan. We will then note how to avoid these scenarios using different planning solutions.
Scenario #1: Accidentally Disinheriting Children from A Previous Marriage
Jacob has three adult children from a prior marriage, Ryan, Devan, and Miley. He marries Marlene who has one adult child, Darcy. Everyone gets along well in this blended family and Jacob decides to leave everything to Marlene in his estate plan in the event of his death.
After three years of being married, Jacob dies suddenly from a heart attack. His $2.6 million in assets go to Marlene. Marlene struggles immensely with the sudden death of Jacob and though she meant for her estate plan to include Jacob’s three children, she never gets around to it. She ends up dying suddenly 9 months after Jacob’s passing. All of the assets she brought into the marriage along with all of Jacob’s assets are left to her daughter, Darcy, leaving Ryan, Devan, and Miley nothing.
Since Jacob failed to update his estate plan ensuring that his three children would be taken care of by leaving everything to Marlene and putting that responsibility on her. He trusted that she would have properly distributed his assets, however she passed away shortly after his death and failed to update her own estate plan. Since she did not originally include Jacob’s three children in her estate plan, everything was left to Darcy, while Ryan, Devan, and Miley inherited nothing from their father’s estate.
Jacob could have used several different planning options to avoid these scenarios. He could have created a revocable living trust that named an independent successor trustee to manage the distribution of his assets to ensure the desired division of his estate between Marlene and his children. He could have created two separate trusts, one for Marlene and one for his children. Jacob would have been able to specifically exactly what assets each individual received. Another option he could have gone with was taking advantage of tax-free gifts to all of children during his lifetime. If Jacob had consulted with an estate planning attorney at North County Legal, he would have fully ensured that his children and wife would have properly been taken care of according to his desires in the event of his passing.
Scenario #2: Accidentally Disinheriting Your Spouse
Randy and Jennifer were married for 25 years, and they had two children together. When their kids were young Randy and Jennifer had both created wills in which they named each other as their sole beneficiaries. Once their children were grown adults and it had been 30 years, Randy and Jennifer divorced. 10 years later, Randy married Patrice, a divorced woman without children. Randy was a very healthy, active individual so updating his estate plan was not on the forefront of his mind. However, within a year of Randy and Patrice’s marriage, Randy suddenly passed away in a car accident.
Since Randy never updated his estate plan, all of his assets went directly to his ex-wife, Jennifer. In the case that Jennifer has already passed away, too, his estate would go to these two children. The state law declares that Jennifer has predeceased Randy since they divorced after the will was enacted. This entails that all of Randy’s assets, including the house that he and Patrice were living in, go directly to his two children. Patrice now receives nothing and is forced to move out of her home while Randy’s children sell it.
Randy unintentionally disinherited Patrice by failing to update his estate plan. If Randy had consulted with an estate planning attorney, he would have been guided to create a living trust where he could have properly arranged his assets as desired. If he had wanted the majority of his assets to go towards his children without causing disruption to Patrice’s life, he could have put his house and funds to maintain the house for her in his trust while his children were left the remainder of his assets. In this case, once Patrice passed on, the children would have received the house and remaining maintenance funds.
Scenario #3: Allowing Assets to Become Depleted
Ken is a 65-year-old divorced man with three adult children when he marries Becky. He has an estate valued at $900,500. He told his children that once he passes away, he hopes they will use that money for their children’s college funds. He also wants to make sure Becky is taken care of, so he creates a living trust where all of his assets are left to Becky and upon her death, his three children. However, very soon after Ken dies, Becky is diagnosed with lung cancer and all of those medical bills were paid for by Ken’s trust. Once she passes away, almost all of the trust had been used for her medical bills leaving Ken’s three children almost nothing.
Ken could have avoided this unfortunate outcome by consulting with an estate planning attorney. He would have been guided to specify in his living trust that a certain amount of his assets was to go to his children while the remainder goes to Becky, or vice versa. He could have also used life insurance to provide for Becky’s medical bills, or even bought a second-to-die life insurance policy for himself and Susan where his children would have been the beneficiaries. This would have ensured that Ken’s children would receive an inheritance upon Becky’s death.
Bringing Families Together, Forever
Whenever life brings you significant change, updating your estate plan should always be a priority, especially if you have remarried and children are in the picture. Here at North County Legal, we are trained to ensure the security of you and your new spouse’s estate planning wishes. We will help you avoid conflicts and confusion over the distribution of your assets upon your death or incapacity. Contact us today to discuss all of your options.