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Planning for Stepchildren and Step-Grandchildren

Planning for Stepchildren and Step-Grandchildren

 

The structure of families has changed in the United States: According to statistics cited by the Pew Research Center, six out of ten women who remarry are in blended families, and in about half of those remarriages, stepchildren live with the remarried couple. If you or your grown children are part of a blended family, your estate planning should reflect the special considerations and complexities involved.

 

Identify Your Goals

Each family has its own dynamics and priorities—and blended families add another dimension that must be considered as you create or update your estate plan. Many factors will have an impact on your estate planning decisions, especially when you remarry and your new spouse has children, or if one of your adult children is in that situation. The decision about whether to provide for your stepchildren or step-grandchildren in your will or trust is an important and often emotionally difficult decision. The following factors are among those in play:

  • Age. When you remarry, the ages of both you and your new spouse and the ages of your stepchildren often have an impact on estate planning decisions. If you and your new spouse are older and both financially independent, and all of your children are adults, it may make sense for each of you to leave your assets to your own natural heirs. However, if you and your new spouse are young adults, and your spouse’s children are quite young, it is more likely your new spouse and stepchildren will be dependent on you for financial support and that you will play a significant role in raising your stepchildren. In this case, you may decide to provide for your stepchildren in your estate plan to some extent or even in the same way you have for your own children. Grandparents are likely to weigh similar considerations in determining whether to include their step-grandchildren in their estate plan. Your decision will depend upon the unique situation of your blended family.

  •  Importance of bloodline. For some people, it is very important that their own children or grandchildren receive the bulk of their money and property. This may be the case even in situations where younger stepchildren are involved and their relationship with those children is strong.

  •  Relationship. Unfortunately, some people simply do not get along with their new spouse’s children or their step-grandchildren. Or, if the stepchildren are grown and live in a distant state or another country, there may not be much of a relationship at all. If this is the case, they may feel less inclined to provide for the stepchildren in their estate plan. In contrast, other individuals come to view their stepchildren with as much love and affection as they do their own children and may want to reflect this relationship in their estate plan.

  •  Heirlooms or other personal property. If one of your ancestors brought a special piece of furniture or jewelry from Ireland in the 1850s that has been passed down through the generations, you may want to ensure that it goes to your own children or grandchildren or to another blood relative when you pass away rather than to your new spouse and ultimately to your stepchildren. This may also be the case if you have items that belonged to a deceased spouse that are of sentimental value to your own children or other family members.

Implement Estate Planning Strategies

It is important to keep in mind that unless you have adopted your stepchildren, they generally have no legal right to inherit anything from you at your passing. Similarly, if you are a grandparent, your step-grandchildren will have no legal right to inherit from you if your child has not adopted them. If you want to leave money or property to them, you must specifically name them in your will or trust.

Nevertheless, if you remarry and leave all your money and property to your new spouse in your will, he or she is free to leave any remaining amounts to their children (and to leave nothing to your own children) at his or her death, even if that is against your wishes. Likewise, if you are a grandparent and leave money or property to your adult child, and that child dies before his or her new spouse, then the new spouse could receive any remaining amounts and is free to spend it or leave it to his or her own children. Your child’s spouse would not be under any obligation to leave the remaining money or property to your biological grandchildren.

If you would like to ensure that your stepchildren or step-grandchildren are treated in the way you intend, it is important to consult us so that we can design or update your estate plan in a way that reflects your wishes.

Will. You may want to provide for your stepchildren or step-grandchildren by naming them specifically in your will. However, if you die while they are still minors or too young to handle the inheritance responsibly, a will without a trust provision is unlikely to achieve the best results. Alternatively, you can also ensure that your stepchildren do not inherit from you, even if you have adopted them, by specifically excluding them by name in your will.

Trust. Trusts are often preferable to wills for blended families, as they allow you to exercise more control over what happens to your money and property after your death. If you have remarried, you can provide for your new spouse for his or her life and specify any amounts that you would like to give to your own children and your stepchildren, as well as how and when those amounts should be transferred to them. In addition, you can indicate certain purposes for which the trust funds should be used, for example, education, support, etc., and if you wish, you can specify different purposes for your own children and your stepchildren (or grandchildren and step-grandchildren). You can also exclude your stepchildren, or if you are a grandparent, your step-grandchildren, from receiving anything from the trust by not including them as beneficiaries of the trust. In addition, you can name a trustee that you are certain will be impartial, so that your own children and your step-children (or grandchildren and step-grandchildren) are less likely to have any grounds for alleging favoritism in the way the money and property in the trust are handled.

Personal property memorandum. Some states allow the use of a personal property memorandum, which is a list of specific personal property that and names the people you would like to receive each item. It typically must be mentioned in your will or trust in order to be valid. You can also include such a list in your will or trust, but those documents can be more difficult to amend if you later change your mind. Regardless of which estate planning tool you decide to use, it is especially important in a blended family to explicitly designate the person that should receive any family heirlooms or items having sentimental value.

Other planning tools. If you do not want to include your stepchildren or step-grandchildren in your will or trust, but would still like to provide a gift for them or acknowledge your relationship, there are other tools that you can use to achieve this goal, such as lifetime gifts or life insurance policy or retirement account beneficiary designations.

We Can Help Design a Successful Estate Plan for Your Blended Family

If your family is one of millions of blended families in our country today, we can help you create or amend your estate plan to ensure that your wishes for your stepchildren or step-grandchildren, as well as other family members, are carried out after you pass away. Please call us today to set up an appointment so we can discuss your unique circumstances and goals and the best tools for accomplishing your wishes for your blended family.


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Three Keys to Protecting Yourself from a Rogue Executor

Unfortunately, sometimes a death in the family can bring out the worst in people. Indeed, family resentments sometimes simmer during a time of grieving - particularly when money and assets from the deceased’s estate are involved. If you are a beneficiary under a loved one’s estate plan, you may be under the assumption that those assets will be distributed according to his or her wishes. Inheritance theft, however, is an under-reported problem that can cost families dearly. Moreover, the theft can be perpetrated by someone who was highly trusted by the decedent - the executor, who is the person typically chosen by the decedent to manage the estate upon his or her death or incapacity. Thankfully, you have the ability to deter a thief from stealing your inheritance and the inheritance of other beneficiaries of the estate.

Safeguard Your Inheritance

There are several ways in which you can ensure that you will not lose your inheritance due to theft perpetrated by a rogue executor. The following are three basic ways to do so:

  1. Knowledge is key: First, be sure to have information about the trust or estate and its assets. You should not get push-back when requesting this. As a beneficiary of the estate, you almost always have a legal right to an inventory and accounting of the estate. This is a summary of all the transactions and assets of an estate or trust and should come with supporting documentation such as receipts or cancelled checks. Even though the executor or trustee is in charge of the assets, he or she is legally required to report on the assets and transactions as well as act in the best interests of the beneficiaries.
  2. Document, document, document: Whether it is a phone call or an in-person meeting, be sure to document everything in writing. Be sure to confirm details such as what you asked for, what you learned, what you received (or did not receive), etc. Courts across the country often place greater weight on written evidence than on verbal testimony.
  3. Get outside help: Understand that emotions run high when a loved one has passed away. This can sometimes cloud our judgment, making legally required or authorized actions performed by the executor seem hurtful. Assistance from a third party can help make sure your rights are protected so that neither you nor the estate are unnecessarily tied down with the expense and stress of court battles.

While the best way to protect your wishes is through a well-drafted estate plan - which includes a detailed will, power of attorney, and trust that appoints multiple individuals as executors - inheritance theft still happens. Theft can occur through undocumented loans, denigration of other heirs, destruction or forgery of documents, or embezzling, to name a few.

Bottom Line

While laws vary from state-to-state regarding how an heir can establish that his or her inheritance has been hijacked or is in danger of being stolen, there are certain basic rights an heir or beneficiary can count on. To learn more, contact us today.


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Legal Paperwork Cheatsheet: A Guide to the Top 12 Must-Have Documents

Whether you own a little or a lot, the last thing you want to do to your loved ones is leave a bureaucratic mess after you pass away or become incapacitated. Aside from mourning your passing or a significant deterioration in your health, this will cause the family additional stress. Heirs may forfeit life insurance payouts, tax deduction advantages, or miss accounts they did not know existed. This is why it is key to have your estate plan in place before life circumstances get the best of you.

In order to avoid problems, below is a list of a dozen documents you should start preparing right away to ensure you have a solid estate plan in place and your heirs are protected.

  1. A will: This is a legal document that states your final wishes in the event of death or incapacity.  In this document, you name an executor to carry out your final wishes, heirs to receive assets from your estate, and a guardian for any minor children you may have.
  2. A trust: This is a legal agreement between you (settlor, grantor, or trust maker), the manager of your assets (trustee) and those who benefit from the trust (beneficiaries). Your assets are put into the trust and managed by the trustee on behalf of the beneficiaries, according to the terms you put in the trust document. All livingtrusts are revocable (can be easily changed) or irrevocable (cannot be easily changed) and are created and go into effect during your lifetime.
  3. Intent letters: These are used to add meaning and context by explaining the reasons why you want your assets distributed or invested in a particular manner. These are particularly useful when the assets are going to be divided unevenly among children or other beneficiaries/heirs.
  4. Personal inventory: Because most wills distribute property in terms that are general, it is important to create an inventory of your personal items to ensure nothing is overlooked and to let family members know if some items are stored in another location. You should include collections, any valuable property, as well as stories regarding family heirlooms.
  5. Power of attorney: This document is essential if you become incapacitated as a result of an accident or illness, because it allows a named person to make key decisions on your behalf regarding your finances and/or health care.
  6. Final wishes: This is particularly important and should include information regarding any pre-arrangements you have made for a funeral or cremation, organ donation, pet care, and who should be notified when you pass away.
  7. Identifying paperwork: These critical documents should be in kept in a safe place, and it would be a good idea to have a copy of each one. These include birth certificates, passports, marriage certificates, immigration papers, and other identifying documentation.
  8. Financial account list: Put together a list of all of your financial accounts. These should include any of the following: checking, savings, money markets, certificates of deposit (CDs), investments, annuity, retirement, pension, etc.
  9. Digital asset list: While software can be useful in keeping track of your digital assets, change of service terms can make this difficult. Instead, keep really important images or messages backed up and saved in a place where your family can access them (and know where to find them);
  10. House paperwork: You should retain all documents related to every real estate property that you own -closing documents, deeds, homeowners’ insurance, tax payment history, etc.
  11. Business ownership documents: If you own, owned, or are buying a business, you should keep all associated paperwork in a safe place. Documents should include, but may not be limited to, buy-sell agreements, stock certificates, LLC shares, operating agreements, corporate minutes, etc.
  12. Past tax returns: At a minimum, you should keep the last three years of tax returns and supporting documentation; if you want to be really careful, keep the seven most recent years.

If you have any questions about these important documents, or planning for your family’s financial security once you are gone, contact a knowledgeable estate planning attorney today.


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