Special Estate Planning Considerations for a Blended Family

Blended families create special estate planning issues.
It is important to address the special estate planning issues involved in a blended family situation.

There are a number of special estate planning considerations that affect those in a blended family. Remarriages are on the rise. According to the article “Estate planning documents for second marriages” from the Cleveland Jewish News, half of previously married seniors have married again.  And the issues are compounded if each spouse has one or more children from a previoius marriage.

We’ve all heard the horror stories of what happens when there is inadequate or no estate planning done to address these issues. Take, for example, a couple each of whom had children at the time of their marriage. Twenty years after the marriage, the husband dies. He had wanted to provide for his second wife, so his will stated that all his assets went to his wife. He may have assumed that anything left would go back to his children after her death, but nothing was put in place to make that happen.

What actually occurred was that his wife lived a long time after he passed, and she simply combined their assets. When she died, her will left all of the assets to her children, and her husband’s children received nothing. The husband’s children didn’t believe that he meant to do that, but because of the lack of planning, that’s exactly what happened.

What were the alternatives? He could have set up a marital trust to hold the assets for his second wife on his death, but upon the wife’s passing, would have gone back to his children. He could have named his wife as trustee to control the trust assets, or, if he wanted extra insurance that the assets remaining at his wife’s death would pass to his children, he could name an independent person or a trust company as trustee to oversee the trust.

Another horror story involves the couple in a second marriage who do not have wills or any other estate plan. Absent a will stating otherwise, Texas law provides that, if the surviving spouse is not the parent of all of the deceased spouse’s children,  a deceased spouse’s share of community property goes to the deceased spouse’s children. As a result, many surviving spouses are shocked go find out that they own their home and other property acquired during the marriage with their step children.

Anyone involved in a second marriage, especially if they have children from a previous marriage, needs to review their estate planning to make sure that their wishes will be carried out and not left to chance or the dictates of Texas law. Not only should they review their wills, but also insurance policies and retirement accounts to make sure that their beneficiary designations say what they want. For more information on what to consider if you are in a blended family situation see https://galligan-law.com/life-stages/blended-families/

There’s no “set it and forget” plan for estate documents, so before you walk down the aisle a second time, or shortly after you do so, speak with an estate planning attorney to clarify your goals and put them into the appropriate estate planning documents.

Reference: Cleveland Jewish News (May 7, 2019) “Estate planning documents for second marriages”

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Estate Planning Avoids Problems With Selling the Family Home

Estate planning can help avoid problems when selling the family home.
Estate planning can help avoid problems when selling the family home.

Family members who are overtaken with grief are often unable to move forward with selling the family home after a parent has passed away. If the family home was not being well maintained while the parent was ill or aging, it might fall into further disrepair. When siblings have emotional attachments to the family home, things can get even more complicated. The difficulty of selling a parent’s home after their passing, depends to a large degree on what kind of estate planning the parent has done.

Much also depends on the family’s ability to ask for help and work with the right professionals in handling the sale of the home and managing the estate. The earlier the process begins, the better.

Parents can take steps while they are still living to ward off unnecessary complications. It may be a difficult conversation but having it will make the process easier and allow the family time to focus on their emotions, rather than the sale of property. This is why is is important to address what happens to the family home in an estate plan.

Here are a few pointers:

Make sure your parents have a will or a living trust. Many Americans do not. A survey from Caring.com found that only 42% of American adults had a will or a trust, and other estate planning documents.

After a parent passes away, there may be costs associated with maintaining the property and fixing any overdue repairs. Make sure to save all receipts and estimates.

Also, the Executor or successor Trustee under the parent’s estate planning documents should secure the property immediately. That may mean having the locks changed as soon as possible. Once an heir (or someone who believes they are or should be an heir) moves in, getting them out adds another layer of complication.

Be realistic about the value of the property. Have a real estate agent run a competitive market analysis on the property and consider an appraisal from a licensed appraisal. Avoid any accusations of impropriety—don’t hire a friend or family member. This needs to be all business.

To keep disagreements to a minimum, the Executor or successor Trustee should frequently update the heirs on how the sale of the house is progressing.

The biggest roadblock to selling the family house is often the emotional attachment of the children. It’s hard to clean out a family home, with all of the mementos, large and small. The longer the process takes, the harder it is.

This is not the time for any major renovations. There may be some cosmetic repairs that will make the house more marketable, but substantial improvements won’t impact the sale price. Remove all family belongings and show the house either empty or with professional staging to show its possibilities. Clean carpets, paint, if needed and have the landscaping cleaned up.

Keep tax consequences in mind. Depending on where the property is, where the heirs live and how much money is being inherited, there can be estate, inheritance and income taxes.  It is usually better to sell an inherited property as quickly as possible. When a property is inherited at death, the property value is “stepped up” to fair market value at the time of the owner’s death. That means that you can sell a property that was purchased many years ago, but not pay taxes on the value gained over those years.

Talk with an experienced estate planning attorney about what will happen when the home needs to be sold. It may be better for parents to create a revocable trust in advance, which will direct the sale, allow a child to continue living in the home for a certain period of time, or instruct the one child who loves the home so much to buy it from the trust. Trusts are typically easier to administer after parents pass away and can be very helpful in preventing family fights.

Dealing with issues in advance through estate planning will help minimize conflicts after a parent passes away. Learn more avoiding estate planning mistakes.

Reference: The Washington Post (May 16, 2019) “With proper planning, selling a parent’s house can be a relatively painless process”

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Probate Lawyers Say Talk to Your Parents About Estate Planning

Probate lawyers say it's important to talk to your parents about estate planning.
Probate lawyers say it’s important to talk to your parents about estate planning.

Probate lawyers often meet with adult children who are trying to settle their parents’ estates. Many times these children are surprised by their parents’ financial situation and the lack of estate planning that their parents have done. When little or no estate planning has been done, it can be expensive and time consuming to deal with all the unresolved issues that  result. That’s why probate lawyers strongly encourage adult children to talk to their aging parents about their finances, their feelings about health care decisions, and whether they have an estate plan in place. But this is easier said than done. How do you start a conversation that includes a discussion of a family member’s mortality?

Sometimes the way to ease into a conversation with aging parents about money and their estate plan, is to discuss your own. If you want to know about their will or estate plan, start by explaining your own estate plan, how you’ve decided to set up your estate and then ask what they’ve done for themselves.

The conversation may feel awkward the first time you start it, says the Daily Local News in the article “Ask your folks about their financial plans,” but you need to get to where everyone is comfortable having the conversation. Your parents’ plans might impact yours, and visa versa. So, it’s good to talk “early and often” not only about your parents’ estate plan, but how they are planning for the costs of retirement, including health care.

It’s important for aging parents to understand that, if something happens to them, their children are the most likely ones to step in and take charge. Your parents need to understand that the more you know in advance, the better equipped you’ll be to make sure that their wishes are followed.

A good opening is to talk about your plans to save for retirement. Ask your parents what they did, or do, about 401(k) contributions. This will give you insight into how well-prepared and knowledgeable they are about retirement savings. If you’re house hunting, that’s an excellent opportunity to get them talking about their furture plans for living arrangements. Do you need to buy a home with a possible “in-law” suite in mind? It’s not a bad question to ask. It shows that you are thinking about their future needs.

Probate lawyers have seen how untangling an estate when there’s no will and no advance planning has been done can tear a family apart. That’s the last thing you or your parents want. Talking openly with them about money, trusts, wills, life insurance and advance medical directives, will give you an idea of what they have or have not done to plan for the future. It may spur your parents on to move forward with their estate plan, if they have been procrastinating.

Even if you learn that they haven’t done any planning and don’t have a will, that is better than not knowing until it’s too late. If you learn that this is the case, you can start educating them about what will happen if they don’t meet with an estate planning attorney. You can offer to take them to meet your estate planning attorney or to give them a few names so that they can decide who they are most comfortable with. This could help them avoid some common estate planning mistakes.

Setting up your own estate plan is another opportunity to ask your parents what they did and what their thoughts are about your  estate plan. Their family may have never done any estate planning, and they might have more than a few family horror stories to share. In that case, you can help them change the family’s dynamic by encouraging them to take a different path.

Reference: Barchart (April 16, 2019) “Ask your folks about their financial plans”

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