Estate Planning for Brady Bunch Families
By Libby Banks, The Law Ofﬁce of Libby Banks
In first marriages, a couple generally has identical goals for their estate planning: take care of the surviving spouse for as long as he or she lives, then distribute what’s left to their children.
But second marriages can be different. The blended family – his children, her children and sometimes their children as well – can require more complicated planning. Each spouse may have separate assets as well as their joint and community assets. Both usually want at least some of their assets to go to their own children after they die. At the same time, they want to make sure the surviving spouse has enough to live on.
When it comes to a blended family, a couple needs to put a plan in place, if they want to be sure their goals are met. This won’t happen automatically.
Think about one of the most famous blended families – the Brady Bunch. What happens if Carol and Mike have all their assets in joint tenancy and don’t have a will or trust? If Mike is the first to die, Carol will get all the couple’s joint assets. But then what happens when Carol dies? Without a will or trust state law steps in. Arizona law says that Carol’s children get her assets. That means the three girls get everything and Mike’s boys are left out. Do you think those girls are going to share the wealth with Mike’s sons? I’ll leave that to your imagination. If Mike and Carol’s plan was to divide everything between all six of the kids, they may have prevented it from happening because they failed to have an estate plan.
What if Mike had a rental property that was in his name only and not in joint tenancy? Again, state law will step in if he doesn’t plan. Arizona law provides that on Mike’s death Carol inherits half of Mike’s sole property and Mike’s sons get the other half. If Mike intends for Carol to get it all (or he wants his boys to have it instead), he has to put a plan in place to ensure that his property goes where he wants it to.
Mike and Carol may want to be sure that the survivor of them is well cared for, but they also want to be sure their own kids share in what’s left after they are both gone. They can plan for this in their trust. The trust can provide that some of their assets go to an irrevocable trust at the first spouse’s death. The surviving spouse is the beneficiary during his or her lifetime, and the trust says who gets the remaining assets on the survivor’s death. Who gets the rest of the assets can’t be changed by the surviving spouse. This way we assure that some of the assets go to the children of the first spouse to die.
An inheritance from Mike’s parents may also be part of the planning. He may want to add it to his and Carol’s joint trust but provide that these assets go to his sons when he dies, even if Carol survives him. On the other hand, he may want to keep the inheritance in a separate trust with only his sons as the beneficiaries.
What about Mike’s 401(k) and Carol’s IRA? If Mike is the beneficiary on Carol’s IRA then on her death he rolls the IRA into his own name and can designate whomever he wants as a beneficiary. If Carol wants to be sure Mike doesn’t designate his new wife as the beneficiary, she has to plan for that. She can create a Standalone Retirement Trust and designate it as her beneficiary. The Retirement Trust can provide that Mike receives lifetime income from the IRA in the Retirement Trust, but the trust allows Carol to say who gets it after Mike’s death – whether it’s her kids or all six kids.
What if that new wife that Mike marries after Carol is gone is substantially younger than he is? If Mike gives all the assets to her, even in a trust that will go to his sons after her death, it may mean his sons don’t get any of their inheritance until they are quite old. If Mike wants them to have something for their retirement, he may need to plan to distribute some assets to them on his death, while still providing for his new, young wife (who, by the way, is not nearly as pretty as Carol was!).
There are many factors that go into estate planning for a blended family. It’s a good idea for a blended family couple to discuss their individual estate planning goals together. If they are similar, then the task may be somewhat easy, and they can plan with the same attorney. If their goals and ideas are considerably different, separate attorneys may be needed.
Most couples do have one common goal, which is doing the right thing for everyone involved: themselves, their spouse, their children, and their spouse’s children. A good estate planning attorney can help put together a plan that accomplishes your goals. If I can help, call me at (602) 375-6752, email me at firstname.lastname@example.org or contact me on my website, www.libbybanks.com.