HAVE A BLENDED FAMILY? GET A LIVING TRUST OR RISK A MAJOR HEARTBREAK
Do you know what’s the most common objection to not having a living trust? “My situation is different.” Many California homeowners genuinely believe that while a living trust may be a valuable estate planning tool for somebody else, their personal situation is somehow unique. How unique? “Simpler.” Oh, it’s just me and my wife. Or: I only have one child; we’re leaving everything to our son anyway.
An experienced estate planning attorney who has dealt with hundreds, possibly, thousands of trust and probate cases can easily poke holes in all these arguments. Admittedly, some families may benefit from a living trust more than others, and in some cases, having a trust is an absolute must.
One of such situations is a blended family. This is what we are going to explore in this blog post.
What is a blended family? It’s a family where at least one parent has children that are not biologically related to the other spouse or partner. Either parent, or both, may have children from previous relationships. The latter is what we usually mean when we are talking about a blended family: both spouses have children from previous relationships. If there’s one type of family who absolutely needs a living trust, it’s this one.
It all comes down to vesting, aka holding title to your property. Let’s say two individuals with children from prior relationships get married and buy a house in California. The wife has a daughter, and the husband has a son. At the time of the purchase, they had to choose how they were going to hold title. Unless advised by an estate planning attorney, most Californians are still choosing Joint Tenancy, so our hypothetical couple does that.
The couple lives a long, happy life. Since they have married later in life, they did not have any children together, only the ones they already had from prior relationships.
Years later, the wife passes away. Soon after, the husband dies as well. The only heirs are two adult children from previous relationships – the late wife’s daughter and the husband’s son. The couple did not have a trust and chose to hold title as Joint Tenants. With both homeowners gone, who gets the house? Both children equally? One child (which one)? Somebody else?
Let’s unpack this. When the wife died, under Joint Tenancy, the husband automatically became the owner of the estate. When he died, the house goes into probate. Once the probate process is over, his son gets it all.
But what about the daughter? Too bad, so sad. Under Joint Tenancy, last one standing gets it all. The last tenant was the husband, who happened to have one son. Absent living trust, the son gets it all, while the daughter does not get a penny, since she was not his daughter, but the daughter of his no deceased wife.
This is just one of many possible inheritance scenarios common in blended families. There are various ways to tweak the outcomes, but only one estate planning vehicle – a living trust – can ensure that the assets are distributed in accordance with the wishes of the spouses.
A living trust set up by an experienced estate planning attorney is like a blank canvas that can be turned into a beautiful painting… Had the couple consulted with an attorney, they would have ended up with a comprehensive trust which would specify who gets what, and when.
For example, the couple could have opted to go half and half: half of the estate goes to the son, another half goes to the daughter after both spouses pass away. Another option is to say in the trust that certain assets acquired by the spouse prior to the marriage go to their respective children, while the house should be sold and split in half. The beauty of a living trust is that it allows being very precise in how you want your assets to be distributed upon your death.
Unfortunately, having no trust means probate, and probate follows general rules set in place by the State of California, which may not always align with your wishes, especially in complex situations like having a blended family.