Most married people leave their estate to their surviving spouse and children. Typically, when the children are from the current marriage, there is no issue with leaving everything to the surviving spouse. That is not always the case with blended families.
Some married people with children from a prior marriage feel that the security of the surviving spouse is paramount. They believe the surviving spouse should be free to do as he or she wants with assets from the deceased spouse’s estate. They typically leave most everything to the surviving spouse; meaning the surviving spouse can spend the entire deceased spouse’s estate and can also disinherit the deceased spouse’s own children.
However, some married people want not only to protect their spouse but also their own children. Careful estate planning consideration and safeguards are needed in such cases.
How much does each spouse want to leave for their surviving spouse versus to leave to their own (biological) children? Do the children have to wait until the surviving spouse dies before receiving some or all of their inheritance? Will the surviving spouse and step children be entangled with each other because of the estate planning?
Many married people try to balance these competing concerns.
Approaches vary. If one’s spouse and step children cannot get along then it may be desirable for all to receive their separate share at death and part ways. Otherwise the decedent’s children must wait till their step-parent dies; waiting often leads to conflict. Rightly or wrongly, the decedent’s children may feel that their step parent is abusing his or her rights as lifetime beneficiary in their parent’s estate, especially if the step parent is the sole trustee.
Where the decedent’s estate is left in trust for the lifetime benefit of the surviving spouse, the trust should be clear and explicit about what rights the surviving spouse has as beneficiary.
When and to what extent is the surviving spouse allowed to receive distributions of trust principal in addition to distributions of trust income? Will the surviving spouse be the trustee who decides upon such distributions? Can the Trustee sell the family residence in order to make more money available to the surviving spouse, or is the children’s consent required? What desired standard of living by the surviving spouse is the trust intended to support? Is the surviving spouse expected primarily to rely on his or her own resources and the trust be a supplemental resource or even a resource of final resort? The trust should address these and other relevant issues.
The intended standard for distributions to the surviving spouse is clearly an important planning issue. Sometimes a person wants his or her estate to supplement the surviving spouse’s resources; however, only to the extent necessary to maintain a certain standard of living. In that case decedent’s trust may require the trustee to consider the sufficiency of the surviving spouse’s own separate resources before distributing any principal.
Otherwise if the deceased spouse’s trust estate is used up this reduces what remains for the decedent’s own children. Taken to one extreme the surviving spouse may be expected to completely spend-down her own assets before the trustee may distribute any principal.
Alternatively, looking at the other extreme, the deceased spouse’s trust may provide that the distributions to or for the surviving spouse’s benefit are to be made liberally and that the interests of remainder beneficiaries (the decedent’s children) are only of secondary importance.
Trying to do right in any given family situation clearly means balancing the expected needs and inter personal family relationships of the beneficiaries in the estate plan. Getting it right can turn out to be well worth it in the long run to those who will live with the results.
“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”