Estate planning has always been important. Today, the blended family is as prevalent as a traditional family. The blended family and estate planning is very important in today’s world. A :blended family” is a family where at least one of the parents has remarried and there step parents and step children. Estate planning becomes very important in this family arrangement to ensure peace after the parent dies and that the wishes of the decedent are carried out and no one is left out.
As an example, Dad is single, owns a house and wants to leave it to his daughter. He also wants to leave her some family heirlooms. Dad remarries and does not prepare a will, trust or engage in any other estate planning. His new wife, step mom, is never added to the title of the house. He dies without a will. Depending on the value of the house, it could all go to the new wife, Step Mom, and leave the daughter out in the cold. This is because of the law of intestacy and succession. Also the family heirlooms and all other personal property will go to the new wife.
However, if Dad had done some estate planning, a trust or will, he could specify what he wants done with his estate and take care of his blended family. By creating a will or a trust he could provide for his new wife, step mother, as he deems fit, leave his family heirlooms to his daughter and take care of his family obligations. As an example, he could use a will to leave his family heirlooms to the daughter and use a trust to allow his new wife to live in the family home and after she dies the house goes to the daughter. He can also set aside monies in a trust for the daughter to go to school.
Today more families consist of a single parent and one or more children. An important issue to be addressed by the single parent is estate planning. If a person dies intestate, without a will, their estate passes to their children. If the children are minors, then the estate is controlled by the parent or guardian of the child. Estate planning allows the single parent to specify what is done with his or her estate. Estate planning can include a trust, a will, both or neither.
Lets say a single father dies leaving two children and a $50,000 life insurance policy, owns some stocks, a house and a car. The father named the children as the beneficiaries of the policy and has no will. Since the children are under the age of 18 they cannot control the monies from the life insurance policy. The house has to be probated and depending on the amount of equity in it, probate can be simple and short or extended. The children’s mother or guardian controls the monies from the insurance policy and the estate. In theory she can do whatever she wants with the money so long as she says it is for the best interest of the children. If the father wanted the money used for college and the mother uses it to buy the child a car at 16 there is nothing that can be done.
The father’s best option is to put the proceeds of the life insurance policy, the house and any other assets such as stocks into a trust with the trustee being a person he trusts. The father can specify that the monies can only be spent on a college education or whatever other purposes the father deems proper. The trustee will have the option of deciding what to do with the house, it can be sold or kept and rented out until such time as the children need the money. The same can be done with the stocks and other assets.
Estate planning, properly prepared and executed can give peace of mind to the person making the estate plan and make life easier on his heirs. If you have any questions, please do not hesitate to contact us.