As Featured in I95 Business Magazine: Our families change over time. Children and grandchildren are born. People get married, divorced, and even remarry. During this time, perhaps you started your business, took over a family business, or married someone with a business? The point is that our family is an ever-changing dynamic, and today, blended families are more and more common. This situation may produce some unique considerations that merit discussion for wills & trusts for blended families. Here’s why.
Take A Lesson from Lucy
The most famous Lucy, aka Lucille Ball, and her husband, Desi Arnaz, had an estimated net worth of $40 million [equal to about $80 million today]. They were successful businesspeople and had two children. They divorced in 1960 and although the couple remained close, Lucy later went on marry comedian Gary Morton. By all accounts, Gary and Lucy had a loving and happy marriage until her death in 1989. Upon her passing, her two children, Lucie & Desi Jr., received much of her estate but many of her personal items such as heirlooms, awards, art, collectibles, and even love letters were unnamed in the estate and Morton kept those for sentimental reasons, which at the time, was fine with Lucy’s children.
A few years after Lucy’s death, Morton went on to marry a woman named Susie McAllister. After Morton died, McAllister inherited all his worldly possessions, which included those possessions of his former wife, Lucy. McAllister decided to auction the remainder of Ball’s possessions purportedly to pay for her house renovations. This of course, did not sit well with Lucy’s children, who wanted the personal items back. A lengthy legal battle ensued and the children ended up buying back many of the personal items from collectors or at auction. The moral of the story here is that estate plans need to be updated on a regular basis, especially after life-changing events such as divorce, marriage, and death. This is particularly true for blended families.
Tools for Blended Families
A blended family often has an ex-spouse, children, and step-children. A thorough estate plan will consider the couple’s current situation, desired wishes, and future scenarios. After all, you want a will to fulfill your wishes and withstand contestation by any former family members, such as an ex-spouse. In addition, there are many instances when a person may wish to pass on their wealth only to their own children and not any future spouse, stepchildren, or step-grandchildren. In these cases, a trust can be invaluable. This is where an estate plan allows you to take time to consider exactly what you intend and execute the legal instruments to ensure your wishes are carried out.
Former NFL quarterback, Steve McNair, had wills drafted two or three times before his death, but never signed them. So, when he was tragically killed in 2009, his estimated $19.6 million was frozen until the case could be resolved in Tennessee courts. He left behind a wife and four children — two from a previous relationship. Family members had to petition the courts to provide guidance for how his relatives were to receive their portion of the inheritance. A trust would have not only designated his wishes, but it would have kept his affairs private. Instead, his estate had to go through a lengthy, tedious public probate process. These sad situations can be avoided with proper guidance and planning.
Taxes & Trusts
A marital trust allows you to financially protect your spouse, typically tax-free. There are many types of trusts that can be set up, depending upon your circumstances. A Qualified Terminable Interest Property (QTIP) is one way to provide for children and a spouse, without allowing assets to pass to the spouse’s children. One of the biggest benefits to a trust is that it allows your financial matters to remain private.
Spousal Effect Law
It is important to note that a relatively new law, called the Maryland spousal effect law, or Augmented Estate Law, ensures that a spouse cannot be written out of a will or impoverished. In many cases, the law provides for at least one third of the estate, and up to one half of the estate if the spouse did not have children. So, it’s important to have sound legal guidance when crafting your will, trust, and estate plan.
Ongoing Reassessment
Life is ever-changing so it’s extremely important to reassess your estate plan on a regular basis: every time that a new child or grandchild is born, when a family member gets married, divorced, or passes away. Accidents or illnesses such as dementia may also require a thorough review of bank accounts, IRAs, and real estate assets that are bought and sold.
Whether you are creating a new estate plan or would like to take precautionary measures to ensure your children and spouse are properly cared for, a trusted estate planning attorney can help protect your best interests. If you have a blended family, a will or trust is an important legal consideration. For more information, download the Free Guide to Wills, Trusts & Probate or schedule a free consultation.
Tara Frame is the Managing Partner of Frame & Frame Attorneys at Law – an estate planning firm that has over 70 years of service to the community. Tara is a graduate from Johns Hopkins University and the University of Baltimore School of Law. This article appeared in the December issue of I95 Business Magazine.