Many folks such as spouses attempt to use jointly owned property to avoid probate.  Jointly owned property avoids probate, but only at the first death.  If probate is avoided at the second death, it’s, likely because the assets have been placed in joint names with a new spouse and your children may be disinherited.

The best way to avoid probate is with a fully funded revocable living trust.  A trust is funded when all assets are either titled in the name of the trust and the beneficiary designation (of contract assets such as life insurance and retirement plans) is changed to the name of the trust.

In addition to not working to avoid probate, jointly owned property (i.e. joint tenants with right of survivorship) should be avoided for its many pitfalls such as accidently disinheriting your children.

For example,

Sally owns her investment accounts, bank accounts, and real estate jointly with her spouse, Frank. They have three children. 

Sally dies and Frank inherits all the assets, outright, and in his individual name. 

Frank remarries; his wife’s name is Jane.  Being used to owning everything jointly with a spouse, Frank puts all of the assets that he and Sally owned together in joint names with Jane.

Frank dies.

Jane inherits everything.

Frank and Sally’s three children are totally disinherited.

The above example is of a first marriage with jointly owned assets.  In a second marriage with jointly owned property, if you die first, your children will absolutely be disinherited.

Instead, look what happens if trust planning is used to avoid probate.

Sally and Frank set up a revocable living trust and fund it.  Sally dies.  Frank and the children inherit Sally’s share of the assets in trust.

Frank marries Jane.

Per trust instructions, the assets remain in the trust to benefit only Frank and the children.

Frank dies.

The children receive Sally and Frank’s assets in their own individual lifetime trust shares.  All is well.

If you want to avoid probate, but not disinherit your children, consult with a qualified estate planning attorney and avoid jointly owned property.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

If your spouse is not the parent of all of your children, you need to protect your children’s inheritance.  Without careful thought and thorough estate planning, your children will be disinherited if you remarry.

The House, the Bank Account, the Investment Accounts, the Vacation House

Most married couples, even those in second marriages, own most of their asset jointly; this form of ownership is called “joint tenants with right of survivorship.”  This joint tenancy has a survivorship feature which means that when you die, the assets go automatically, by operation of law, to your spouse, regardless of what your will or trust states.

If you want any of these assets, the house, bank and investment accounts, or vacation property to go to your children, own them in your revocable living trust; DO NOT own assets jointly with your spouse.

And, remember that community property goes to your spouse as well, not your children.

Your Special Personal Possessions and Family Heirlooms

If you’re like most married people, you have provisions in your will or trust passing your personal possessions (i.e. tangible personal property) to your spouse.  This means that Grandma Idah’s china, Aunt Katherine’s jewelry, and Uncle Ned’s tools all go to your spouse, not your children.

If you want your children to inherit special personal possessions and family heirlooms, give them away during your lifetime, make specific provisions in your will or trust, or use a memorandum.  Lifetime gifts and provisions in your will and trust are legally enforceable; generally, a memorandum is not (unless it’s it notarized and witnessed like a will.)  If you think there will be a hassle or someone may not honor your wishes, don’t use the memorandum.

If you have any questions or concerns about using estate planning to protect your children’s inheritance when you’re in a second marriage, consult with a qualified estate planning attorney.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Blended families are families that have children from previous relationships.  Every family has conflicts, jealousies, and positioning; and, blended families have all these things in bold.  To keep the fireworks on the 4^th of July and not on any other day, implement these 4 tips for using estate planning to keep peace in your blended family.

• Avoid Joint Ownership

Do not own assets, which you want to go to your children someday, jointly with your spouse.  If you die first, the assets will go, by operation of law, to your spouse and your children will have no right to them, ever.  Instead, own your assets in a revocable living trust and direct where your assets go.

• Tell Your Family You’ve Done Estate Planning

Have a family meeting wherein you tell your family that you’ve done estate planning and that they are each provided for and protected; make sure this is true.  Include grandchildren and step-children in some way in your plan.  Tell each family member that you love them in as many ways as possible.

• Update Your Estate Plan Every Three to Five Years

Update your estate plan if you have a significant life change such as divorce, remarriage, or new child; but at least every three to five years.  Updating is the only way that your estate plan will do what you want it to do.  In addition, many ex-spouses have inherited significant sums because beneficiary designations have not been updated; so, remember to update life insurance and retirement plan beneficiary designations as well as your estate planning documents.

• Ensure that Your Children Inherit at Your Death

Don’t pass everything to your spouse and make your children wait until your spouse dies to receive an inheritance.  This causes emotional strain and devastated relationships.  Instead, spread the assets around so your children inherit at your death; use life insurance to fund inheritances if needed.

If you have any questions about how to use estate planning to keep peace in your blended family, consult a qualified estate planning attorney.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Keeping the peace within a family is one of the greatest benefits of estate planning, likely more important than saving tax dollars.  Blended families, those families with have children from previous relationships, have an extra challenge, in keeping the peace.  Here are 3 ways to use estate planning to keep the peace in your blended family.

• Communicate

Let all of your children, as well as your spouse or partner, know that you love them and have provided for them in your estate plan.  Let them know who’s in charge, when, and why.  For example, if your spouse is going to make health care or financial decisions on your behalf if you are incapacitated, let your family know ahead of time what to expect.

If you are doing anything “unusual” in your estate plan, such as giving children different inheritances, deal with it now; don’t leave them to grapple with hurt feelings after your death.

• Put it on the Record

All of your estate planning wishes must be documented in writing to be legally effective.  Execute a comprehensive estate plan with the assistance of a qualified California estate planning attorney.  If your estate plan is not in writing, state law and the courts will determine what your estate plan is, not you and not your family.

• Provide for Your Children Immediately

Don’t make your children from a previous relationship, wait until your second spouse or partner dies to inherit.  A delay causes life-long resentment and competing interests.

If there are not enough assets to go around, consider purchasing life insurance.  If you are uninsurable or the insurance is unaffordable, be sure to provide for those who are financial dependent upon you during your lifetime and discuss the matter with all loved ones.

Whether you are passing financial assets or not, provide a special personal possession or family heirloom to each loved one, along with a love letter telling them how you feel.  These are cherished inheritances and a clear indication of your love; that’s the true purpose of estate planning for blended families.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.