There are times when we meet families where parents are estranged from their children. Life can be complicated and without knowing both sides of the story, you can never judge the situation. When this happens, estate planning is very important. We recently met with a couple on their second marriage with this exact situation.
The Wife had decent assets, no children, and the Husband had less assets, with three children with whom he was estranged. The Wife was very concerned about dying first and having all of her assets go to his children. We discussed different ways to avoid that. In the end, she chose to provide for her Husband through a Trust during his life, and have the balance of the assets upon his death, to go to her favorite charities.
The Wife died a year ago. Her trust is in place, with multiple co-Trustees. The Husband has enough to live on with his own assets, and is receiving some funds on an annual basis from the Wife’s Trust. If he lives another 20 years, the Trust will still exist, and will have accomplished all of her goals – take care of her Husband during his life, avoid any money from going to his estranged kids, and providing for the charities she graciously donated to for years during her own lifetime.
These are the scenarios that make the world of estate planning so satisfying. Often lawyers do not have the best reputation because you are usually going through a difficult time, in a divorce, lawsuit or bankruptcy. However, in estate planning, clients are focused on protecting their family and their hard earned wealth. Estate planning attorneys use their years of experience and expertise to find the right solutions that best fit each family.
Some of the most common mistakes when it comes to blended families include:
(a) Not taking care of your children from a previous marriage – It’s very common for a married couple to give everything they have to their surviving spouse. However, if it’s not planned correctly, the surviving spouse receives 100% of the assets, and then when he/she dies, all of such assets only go to his/her children, and NOTHING goes to the deceased spouse’s children from a previous marriage. This exact situation has caused more resentment in families than any other scenario that we have witnessed with our clients.
(b) Not changing your beneficiaries – When you get divorced, or separated, it’s easy to forget to take off your ex-spouse from your beneficiary designation on your retirement accounts and life insurance. Then when you are remarried or are in a new relationship, it’s usually not the first thing you think about. When you die, those funds go to your ex-spouse, regardless of your divorce decree. In IL, the beneficiary designation is a contract and it must be followed. Some states will recognize the divorce and will give it to the subsequent beneficiaries. But no in Illinois.
(c) Living together with no estate or financial plan – It’s becoming more popular to cohabitate rather than get married. Even if that is the case, I highly advise couples to have a plan when it comes to finances and estate planning. If one of you gets disabled, or dies, the other person has to be able to know what to do with your assets, how to pay bills, and what to say to the doctors. When you are married, some assets may be co-owned, or the doctors may speak to you as the spouse. But if you are not married, your rights to take care of your partner are very limited without having documents in place.
In short, the nuclear family of 2 parents and 2 kids is increasingly becoming uncommon. Families come in all sorts of shapes and sizes. Therefore, if you want to make sure your hard-earned assets are distributed to the right people or charities, plan ahead with an estate planning lawyer in Arlington Heights, IL.
Thanks to Bott & Associates, Ltd. for their insight into estate planning and estranged families.