Estate Planning for Second Marriages?
Estate planning for second marriages present unique challenges. After a divorce, it is important to change your beneficiary designation forms and amend your Last Wills and Testament and your Revocable Living Trust documents. Sean Robertson and Gateville Law Firm concentrate in estate planning for second marriages and blended families.
The concept of “family” is evolving in this country. The traditional family is a fallacy because families have combined together to create unique blends. For example, families consist of two and three marriages and children from different marriages with each parent having children from different marriages. The Merriam Webster Dictionary defines blended family as a “family that includes children of a previous marriage of one spouse or both”.
When I practiced family and divorce law, it was common to see divorced couples get re-married or establish non-traditional relationships with similarly minded persons. These unique family situations create complicated estate planning situations. One of the goals of an estate planning attorney is to minimize family conflicts.
A natural family conflict is the distrust between a stepparent and a stepchild or children. Many phone calls involving estate disputes occurred among blended families because the natural children of the deceased distrusted the stepparent especially involving money or real estate.
ESTATE PLANNING STRATEGIES FOR BLENDED FAMILIES
1. Who Inherits the Family House?
The Family House is an interesting concept because the family house consists of two (2) possibilities. The first possibility is the family house is a non-marital asset of one person. For example, Sue Smith is recently divorced and keeps the family house in the divorce proceeding.
After a couple of years, John Jackson moves in and marries Sue Smith. Sue Smith has been divorced once time with two (2) adult children (18 and 23 years old) and John Jackson has never been married and has one (1) adult child, 25 years old.
How should the family home have been distributed upon Sue Smith’s death? This is a real and interesting situation. First, Sue Smith will be committed to her adult children and will want her adult children to inherit her house and assets. On the other hand, her husband, John Jackson, has paid the mortgage and the expenses of the new “family home”.
Option 1: No Estate Plan
Sue Smith deceases in 2018 without a will or trust and John Jackson was never on title to the house. John Jackson and Sue Smith have lived together for five (5) years and John Jackson is confused and does not know what his legal options are. Under Illinois law, John Jackson inherits fifty (50) percent of the house and Sue Smith’s adult children, inherit fifty (50) percent of the house. Thus, Sue Smith’s children each inherit a twenty-five interest in the house.
Under 755 ILCS 5/15-1(a), Spouse’s Award may in no case be less than $20,000. Under Illinois law, the surviving spouse of a deceased resident shall be allowed a sum of money that the court deems reasonable for the proper support of the surviving spouse for the period of 9 months after the death of the decedent in a manner suited to the condition in life of the surviving spouse and to the condition of the estate and an additional sum of money that the court deems reasonable for the proper support of the surviving spouse.
As you can imagine, this situation is a family conflict disaster because any money that the surviving spouse gets is money that the adult children will not receive. The step children of John Jackson likely have a major distrust for Sue Smith’s children. First, this matter likely will get decided in Probate Court. Probate court requires attorneys and can be adversarial and expensive.
Option 2: Sue Smith had a traditional will
Sue Smith had a will and the same scenario as above plays out except Sue Smith’s wishes are outlined on paper. John Jackson or Sue Smith’s children will likely be unhappy and consider contesting the will. Again, John Jackson and Sue Smith’s children will likely either hire an attorney or consult an attorney regarding their legal options. Option 2 is a bad option.
Option 3: Sue Smith goes to an estate planning attorney and creates a Revocable Living Trust
Option 3 involves Sue Smith consulting Gateville Law Firm and getting estate planning advice to plan her and her husband’s estate plan. Sue Smith decides to create a Revocable Living Trust and leave her house to John Jackson until he dies or sells the house.
Upon death or selling of the house, John Jackson will keep the house proceeds. Sue Smith decides to use her life insurance proceeds to distribute to her children. Sue Smith’s Revocable Living Trust has a provision where upon John Jackson’s death, the house will go to her adult children who will equally split the inheritance (if any).
In this situation, the estate planning attorney purposely attempts to alleviate the family conflict and find a win-win situation which does not put John Jackson and Sue Smith’s adult children in an adversarial position.
Furthermore, Sue Smith’s parents will be concerned about leaving her an inheritance because if Sue Smith dies, John Jackson likely will inherit her parent’s money. A simple solution here is to set up a Bloodline Trust
The benefit of a Bloodline Trust is to keep family money in the family. Thus, the Bloodline Trust is an estate planning and asset protection tool to prevent the in-law from inheriting Sue Smith’s parents’ money.
There are several advantages of a Bloodline Trust. The first advantage is the inheritance is protected from creditors such as a divorcing spouse or your beneficiary’s creditors. Here, the key is to remember that your beneficiary’s creditors are the target and they cannot touch her money.
The second advantage is Trust Assets only can be used for blood family (or adopted family). This prevents the in-law from touching the family inheritance. Trust assets cannot be utilized to provide alimony or support to the divorcing spouse. Your child can distribute Trust principal and income to themselves or their decedents.
Upon your child’s death, the Trust terminates and can only be distributed to blood relatives such as your grandchildren. More importantly, the Trust is revocable during your lifetime, which means that you can alter, amend, or revoke the Bloodline Trust.
The Bloodline Trust solves a couple of problems. The first problem is the family inheritance can be taken by the son or daughter-in-law. The second problem is the son or daughter-in-law can change the terms of their Revocable Living Trust after their spouse dies and disinherit your children or grandchildren.
The third problem is your daughter’s inheritance can lose its’ non-marital status by being commingled with their current spouse’s money and assets.
ESTATE PLANNING ATTORNEYS FOR DIVORCEES AND SECOND MARRIAGES
Sean Robertson and Gateville Law Firm are uniquely qualified to assist blended families because Sean Robertson used to concentrate in family and divorce law. Now, Sean Robertson focuses exclusively on estate planning, asset protection, and real estate law, which are interrelated. Sean Robertson understands the divorce and family law perspective much better than most estate planning attorneys.
Sean Robertson utilizes cutting edge estate planning techniques such as Bloodline Trust and Incentive Trust to design an estate planning that minimizes any family and estate conflicts and protects your hard-earned assets. More importantly, estate planning protects your legacy and prevents your legacy being known as creating a family and estate nightmare.
EXPERIENCED ESTATE PLANNING AND LIVING TRUST LAWYER FOR SECOND MARRIAGE ESTATE PLANNING
In conclusion, Sean Robertson concentrates in estate planning and real estate law. Sean Robertson understands the unique challenges facing divorcees and blended step-families and children. Sean Robertson is passionate about assisting families with their estate plans and shaping positive legacies. Sean Robertson may be reached via online contact form or 630-780-1034. Our website is www.GatevilleLawFirm.com.