What Happens When a Blended Family Doesn't Have an Estate Plan?

With divorce rates approaching 50%, many families consist of second or subsequent marriages and blended families. When blended families are involved, there are special estate planning considerations that must be addressed.

It is important for blended families to understand the impact of failing to have an estate plan.

Blended Families with No Estate Plan

Under Virginia law, if your spouse has children from a previous relationship and he or she dies without a will, you receive one-third of the estate and his or her children receive two-thirds of the estate.

This is often a surprise to Virginia families who may believe that the current spouse should receive everything that his or her spouse leaves behind.

Blended Families and Wills

To avoid the default rule mentioned above, wills for blended families can be drafted. Typical wills for blended families may give all of the property to the surviving spouse. Another option is to designate certain property to the spouse and other property to the children.

However, once one spouse dies, the surviving spouse is free to then go and change his or her will, and can effectively cut out the decedent spouse’s children from a prior relationship. Therefore, you may want to consider other options than leaving everything to your spouse and then expecting him or her to subsequently divide property with your children.

We, at Golightly Mulligan & Morgan, can provide clients with an estate planning agreement, to lock in the estate plan and to prevent the surviving spouse from changing the plan after the first spouse passes.

Trusts for Blended Families

An alternative to wills for blended families is a trust. A trust is a legal document that sets out specific instructions regarding how you want your property managed.

You can choose to manage the property that you deposit into the trust during your lifetime and name someone whom you want to manage the property after your passing. This way, you can ensure that your surviving spouse can benefit from all assets in the estate for the rest of their lifetime, and also that at your surviving spouse’s death, the remainder will pass to who you want.

A trust provides greater flexibility for individuals because trust funds or property can be used as the trustee sees fit, such as for the beneficiary’s health, education, maintenance, and support. It will also give the grantor (spouse that made the trust) peace of mind to know that after their death, their spouse will be taken care of, and that their spouse will not be able to cut out their children from a prior relationship.

Beneficiary Designations

Blended families may benefit from beneficiary designations.  If a spouse, with a child or children from a prior relationship wants to leave everything to their current spouse, but also wants to ensure that their child(ren) from the prior relationship are taken care of, they can choose to name the child(ren) as the beneficiaries on a life insurance policy or a qualified retirement account, and leave everything else to their current spouse.

Contact an Estate Planning Lawyer

At Golightly Mulligan & Morgan, we carefully listen to our clients’ wishes and guide them through the relevant state laws that may impact them. We build a customized estate plan that clearly communicates their wishes and achieves their objectives.

Revocable Trusts vs. Irrevocable Trusts

One of the most common questions we receive in our estate planning practice is, "What is the difference between a revocable trust and an irrevocable trust?"  In this blog, we will provide a brief overview of the key differences between these types of trusts and give a few examples on why estate planners use them.

 

A revocable trust is often also referred to as a "living trust."  Estate planning lawyers use revocable living trusts to avoid court supervised probate, which often allows for the efficient and expedient distribution of a decedent's property.  As its name implies, a revocable living trust is easy to amend or revoke.  Indeed, for all intents and purposes, assets owned by revocable living trust are handled much in the same way as assets owned by an individual.  For example, while the creator of the trust is still alive, these types of trusts do not file their own tax returns because income flows directly to the person who created the trust, often called the "grantor."

 

On the other hand, an irrevocable trust is often used by estate planning attorneys to allow clients to either remove assets from the client's estate for estate tax purposes, or to provide added asset protection features.  The primary concept behind an irrevocable trust is the fact that the person who set up a trust no longer has ownership and control over the assets placed inside the trust.  Because such a trust may only be changed under very limited circumstances, the person who created the trust may avoid or mitigate estate taxes otherwise due on those assets when he or she dies.  With the proper planning, a client may also be able to use an irrevocable asset protection trust to exempt trust assets from a tort creditor or in a bankruptcy proceeding.

 

Although irrevocable trusts have somewhat limited application these days due to the high estate tax exclusion (currently, estate taxes only hit individuals with more than $11,200,000), we do use these trusts for asset protection purposes.  Conversely, we use revocable living trusts in our practice quite a bit to allow clients to avoid the probate process.  You may read more about the probate process in our "what is probate" blog here on our website.

 

Thanks for taking the time to read this.  Let us know if there's anything we can do to assist you with your planning.  Email: info@golightlylaw.com or call at 804-658-3873.

What is Probate?

December 28, 2009

What is “probate”?  Probate is basically the process of proving before the appropriate court that a document identified as a last will and testament is genuine.  The advocate of the will, often the “executor” appointed in the will itself, presents the original of the will to the Clerk of the Circuit Court located in the city or county where the decedent lived at the time of death.  The Clerk then reviews the document to confirm that it meets the requirements under Virginia law for a validly executed and properly proven will.  If so, the will is received for recordation by the clerk.

How much does it cost?  When you probate a will, you will be asked to estimate the value of the estate assets, including real and personal property, located in Virginia when the decedent died.  For estates over $15,000, the Clerk will collect a probate tax based on a rate of 10 cents for every $100 of value.  Some courts also charge an amount equal to 1/3 of the applicable probate tax.  So, if the decedent’s estate had an estimated value of $500,000, the Virginia probate tax would be $485.00, plus 161.66 if the locality charges an additional 1/3.

How long does probate take?  This question does not lend itself to a “one size fits all” answer.  The length of time probate will take depends on, among other things, the size and complexity of the estate, the Circuit Court handling the matter, and the efficiency of the executor.  As for certain “hard” deadlines, the executor must file an inventory of assets with the “Commissioner of Accounts” within four months from the date on which they qualified as executor.  An accounting (basically a detailed check register) must be filed within sixteen months from the qualification date.  Basically, probate takes as long as it takes the executor to wind up the estate, identifying and paying just debts and distributing the remaining assets among the beneficiaries as spelled out in the will.  The real point of the inventory and accounting process is to protect the beneficiaries.  The Commissioner of Accounts only job is to ensure that the executor is properly doing his or her job, holding that person accountable for properly disposing of property to appropriate beneficiaries as the testator requested.

So, all in all, probate in Virginia is designed to facilitate the orderly winding up of a decedent’s estate.  The process ensures that the executor carries out his or her responsibilities, and it also serves to protect beneficiaries from executor’s mistakes or, in rare instances, fraud.  With a tax rate of 10 cents for every $100 over $15,000, only a small fraction of the estate goes to the court in the form of a probate tax, leaving almost all of the estate, after payment of just debts, to the beneficiaries.