In our first Article of this Series, we talked about the legal consequences of remarriage and how it can negatively impact biological children from a first marriage. We introduced you to Jane and Harry, the second marriage for each of them, and their blended family of six children. Let’s add on to our story: Jane came into this new relationship with a fairly large bank account, an inheritance from her late father. Jane owned stocks, had multiple retirement accounts, and two homes. Harry didn’t own real estate and had a small printing business that carried some risks and incurred monthly debt.
Jane and Harry are soulmates and share everything. Jane trusts Harry to take care of her three biological children just as Harry trusts Jane to do the same for his own three children. But these six children are legally distinguishable ~ If either Harry or Jane were to die without an estate plan in place (legally called dying ‘intestate’ or without a will), Harry’s bio kids can inherit legally from Harry, but not directly from Jane. The same goes for Jane’s children; Harry’s children would not legally inherit directly from Jane because they are not her direct descendants. BUT, if Jane left everything to Harry, her wealth would not be distributed to her three children, Joe, Mary and Tony. Harry would control Jane’s money and Jane’s children could be, effectively, disinherited. Harry could then pass along Jane’s inheritance to his own three children, blocking any inheritance rights of Joe, Mary and Tony. Or worse, Harry’s business creditors could collect their debt through Jane’s assets.
Let’s turn back to Jane and her biological children, Joe, Mary and Tony, and extend our facts. Joe, Mary and Tony are minor children when Jane unexpectedly passes away. Jane and Harry had executed wills early in their marriage, leaving everything to each other. At that time, Jane and Harry believed that their blended family would successfully merge; Jane had no misgivings about Harry’s desire to care for Jane’s children and thought he would be a good steward of her father’s inheritance. Sadly, Jane was wrong. Harry inherited all of Jane’s wealth and, because he had never legally adopted her children, he had no legal obligation to care for them. Joe, Mary and Tony went back to live with their biological father and his family and Harry now controlled Jane’s wealth, leaving her three children cut off from Jane’s family wealth.
Obviously, this consequence was not what Jane’s father had in mind when he bequeathed her his estate. He had no connection with Harry or Harry’s children, but they ended up with his wealth after Jane’s death. How could this result have happened? It is not fair, not the intended result, but it is a legal conclusion that can occur if Jane does not consider these factors in her estate plan.
Even if this example is not exactly like your family’s circumstances, mismanaged inheritance can transpire in ways that families do not intend. Everyone has their own, or has heard stories, of how wealth, property and ownership in assets within families can dissipate quickly, often as a result of divorce, death, mishandling, and/or lack of planning. Are there solutions to keep these unintended circumstances at bay? Absolutely!
The most effective way to protect children from disinheritance is to establish a trust-based estate plan and to keep your beneficiary designations up to date. A trust will allow you to create and define a plan for the eventual distribution, management, control, and use of your money. You can choose trusted individuals or professionals to honor your wishes and administer your estate in the manner you would want. Your money stays within your biological family tree and your heirs receive what you want them to have. Nothing is left to chance, misunderstanding or impropriety. Our next Blog will talk about how this will work.
As always, the Harris Law Firm is available to help you find the right solutions to your family’s estate planning needs. Let us be of service so that your family is always protected.