Estate Planning Issues for Blended Families and Second Marriages

Blended families and second marriages create a number of issues in the context of estate planning.  Difficult decisions must be made and competing interests must be prioritized.  Some of the common concerns include the following:

  1. Providing for the new spouse.
  2. Providing for children from a prior marriage.
  3. Providing for children born during the new marriage.
  4. Protecting assets from prior spouses.
  5. Whether and to what extent to provide for a new spouse’s children from a prior marriage.

What Happens to Your Assets After You Die

The key to estate planning for blended family is understanding two things: (1) the natural or default rules for distribution of your assets after death; and (2) your wishes for how those assets should be distributed.  Then it merely becomes a matter of prioritizing those interests, making tough decisions, and putting together a plan that accomplishes your objectives.  This plan may use a variety of tools such as a last will and testament, a trust or trusts, and marital property agreement.

For example, do you want to distribute all of your assets outright to your new spouse?  If so, do you know that your new spouse then has complete control over how those assets are distributed at his or her death?  What if your new spouse chooses to cut your children out of his or her will?

Do you want to provide for your children from a prior marriage?  Should they have to wait until your new spouses death or should they receive some sort of distribution immediately?  If they wait per the terms of a trust, that can often lead to bad feelings between your children and your new spouse – especially if the children must wait a long time to receive what they see as their rightful inheritance.

What about children born during your new marriage?  Should they receive some priority in the inheritance?  Should they receive the same percentage as children from your prior marriage?

What about your new spouse’s children from a prior marriage?  Should they receive any of your assets you acquired prior to marrying their parent?

How much control should your prior spouse have over your assets if your children are minors?  If you pass away leaving your assets to minor children, your prior spouse, as their parent, is a natural guardian of their property as well.  Should that spouse be able to use and dispose of your assets (for only the children’s benefit of course!) during their years of minority?  Perhaps those assets you left to your children would be better protected by an independent trustee?

Wills versus Trusts as Estate Planning Tools for Blended Families

A Last Will and Testament is the most basic estate planning tool and even if you choose to plan through some type of trust, you should always have a will in place to take care of any forgotten assets.  This is commonly referred to as a pour over will in that it leaves any remaining assets to the trust established as your main planning vehicle.

The problem with relying on a will as the primary planning tool in blended family estate planning is that once an asset is distributed under your will, you lose all control over how that asset is used or distributed upon the beneficiary’s passing.

For example, if you leave all of your assets to your new spouse, then you have no control over how your new spouse chooses to distribute those assets via his or her will.  While you may be aware of the contents your new spouse’s will now, your new spouse can always change their will after you pass.  This is one of the most common ways in which children from a prior marriage get left out.

Those assets you dispose of with a will are also subject to the beneficiary’s complete control – and therefore – subject to claims by their creditors or gifts to people you may not want to receive the benefit of all your hard work.

For example, if leave your assets to a spouse who remarries – then their new spouse now has access to all of your assets and hard work.  It would be a shame for those assets to go to waste and not be available to provide for your children.

That is why most blended family estate planning will involve the use of trusts.  A trust allows you to plan for who should benefit from your assets through multiple generations.

For example, your trust might provide that your new spouse gets the benefit of any income from your assets during his or her lifetime, but upon her death that right passes to your children.  In this case, your children might be children from a prior marriage or children from your new marriage.

A trust also allows you to protect your assets from creditors of your spouse or children, and also from greedy deadbeat spouses if your spouse remarries after your passing or your children choose their spouse poorly.

Trusts also allow some flexibility – for example – your children or spouse may hold a special power of appointment allowing them to designate who should receive future distributions from the trust when they pass.  However, you can place restrictions on that power of appointment such as limiting the potential appointees to individuals in your bloodline or within another defined group.

Beneficiary and POD Designations on Retirement Accounts and Life Insurance

Regardless of whether you conduct your estate plan through a will or a trust, you must ensure that your beneficiary and POD designations on any retirement accounts and life insurance plans are consistent with your estate plan.

If your primary planning vehicle is a trust, but your primary assets are in retirement accounts or life insurance policies that name an individual beneficiary, then your well thought out plan will be wasted.

Beneficiary designations can also be an important tool in estate planning for a blended family by providing opportunities to benefit different interests at the same time.

When assets are tied up in a trust for a new spouse’s benefit during his or her lifetime, the children from a prior marriage who might expect to receive the benefit of those assets down the line can develop ill will toward the surviving spouse.  This may lead to litigation between the surviving spouse and children over distributions made to the surviving spouse.

Using life insurance or retirement account distributions to provide some immediate benefit to children from a prior marriage can help avoid these complications and provide some immediate use of your estate by everyone with an interest in it.  This can help avoid conflict between your family members interested in your estate.  But these designations should be well thought out and consistent with your overall estate plan.

Planning for a Second Marriage with Pre and Post Marital Agreements

Pre-marital agreements are also a commonly used tool in estate planning for blended families.  Texas is a community property state and there is a presumption that all assets are community property unless you (or your executor) can establish that the assets as separate property acquired prior to marriage, by gift, devise, or descent.  Income from separate property is also community property.

But property agreements between spouses can be used to change these rules including characterizing property as community or separate as well as characterizing future income from that property.  While pre-marital agreements are the most common type of marital property agreement, in Texas marital property agreements may be entered into during marriage.

Pre and post marital agreements are often an important tool to balance the interests between new spouses, children from prior marriages, and children from a new marriage.  This is because only those assets that are your separate property or your share of community property are subject to your estate plan.

You cannot control or dispose of your spouse’s separate property nor their interest in community property, and likewise, your new spouse cannot control or dispose of your separate property or your interest in community property.

This makes pre and post-marital agreements important in clearly defining which assets will be available to each set of beneficiaries under their estate plan.  This also helps avoid nasty disputes that often arise among blended family members by allowing the blended family spouses to clearly define which assets are subject to disposition under each of their individual estate plans.

If you are about to remarry, or are already in a blended family marriage, and would like to schedule a consultation to discuss putting together an estate plan, then please visit my contact page and schedule a free consultation today.

How Do I Probate a Will If I’ve Been Appointed Executor

Many times people are appointed executor under the terms of a will but have no idea how to start the process of probating the will and opening an administration. This article provides a brief overview of the process of probating a will and the initial steps in administering the estate.

Step 1: Meet With An Attorney

A lot of people don’t understand why an attorney is required to probate a will as they often hope to save a little money by trying to probate the will themselves.  So let me explain.

When a will is admitted to probate for administration, it creates an estate that is a separate legal entity.  The individual serving as executor cannot appear in court pro so because the estate is a separate legal entity.  The executor would be appearing on behalf of the estate which would constitute the unauthorized practice of law.

Still people balk at having to pay attorneys fees.  While I understand no one likes to spend money, the good news is that fees incurred administering the estate can be charged to the estate as a priority claim payable only behind funeral expenses and any family allowances.

So the first step is to meet with an attorney, or several attorneys, until you  find an attorney that you feel comfortable working with.

Step 2: Evaluate the Estate and Need for Probate

Working with your attorney, you will review the known assets and liabilities of the deceased’s estate.  You will also evaluate the family members, beneficiaries, and family dynamics that might impact probating the will.  These factors will all serve to help you and your attorney decide whether the estate requires a full administration or whether the will could be admitted to probate as a Muniment of Title.  You read more about probating a will as a Muniment of Title here.

You will also evaluate whether there is a need for emergency orders.  For instance, you may need an order to access a safe deposit box where the will is located.  Or maybe someone has possession of the will but refuses to turn it over to you the executor, or to present it to the probate court.

You will also evaluate whether there is a homestead or any exempt property that will require special care during the probate process.

Step 3: File an Application to Probate the Will

Your attorney will work with you to prepare an application to probate the will.  The contents of the application will depend upon the type of will, the type of probate proceeding you are pursuing, and the manner in which the will was executed.  You will also need to acquire information on the family, beneficiaries, and any documents necessary to support the application.

If there are ambiguous terms in the will or questions about whether someone qualifies to receive a devise under the will, you may also need to file a Determination of Heirship or Declaratory Judgment action to protect the executor from claims related to distributing property to someone who is not a beneficiary.

Step 4: Attend the Hearing to Admit the Will to Probate

The person appointed executor by the terms of the will must attend a hearing for the purpose of admitting the will to probate and issuing letters testamentary to the executor.  This hearing usually occurs only a few weeks after the application is filed.

Depending upon the manner in which the will was executed, there may or may not be additional witnesses required to attend such as witnesses to the will or witnesses who can testify as to the testator’s handwriting.  If the will is self-proved, the only witness may be the person appointed executor under the will.

The good news is that probate hearings are less formal than traditional court hearings – though it is still a court and you should treat it as such.  Most hearings to admit a will to probate will only take about 5-10 minutes unless there are contested issues.

Step 5: After Admitting the Will to Probate There Are Several Statutory Requirements

The newly appointed executor has several obligations within the first 90 days of admitting the will to probate and the executor’s attorney will advise him or her on meeting those obligations.

For example, the executor is required to publish a notice to creditors and to provide notices to beneficiaries under the will.  The executor will also have to prepare an inventory, appraisement, and list of claims or file an affidavit in lieu of the inventory, if allowed.

Step 6: Administer the Estate

This step also begins immediately after the will is admitted to probate.  The executor is responsible for administering the estate by collecting all of the estate assets, paying or rejecting claims against the estate, handling any claims the estate may have against a third party (such as wrongful death), maintaining and preserving estate property for the benefit of the beneficiaries, and eventually distributing those assets to the devisees in accordance with the terms of the will.

The complexity of the administration will depend on the types of assets in the estate as well as whether the estate is administered independent of oversight form the probate court.  A full discussion of administering an estate is a detailed and lengthy subject that is beyond the scope of this article.

If you were appointed to serve as executor of a will and would like to schedule a consultation, please visit my firm website for more information on scheduling a consultation.

Key Child Custody Terms in Texas

The legal terms used in child custody proceedings are different from the every day terms such as “custody” and “visitation.”  This article provides definitions for some of the more common terms you will likely encounter during a divorce proceeding with children in Texas.

JOINT MANAGING CONSERVATORSHIP. “Joint managing conservatorship” means the sharing of the rights and duties of a parent by two parties, ordinarily the parents, even if the exclusive right to make certain decisions may be awarded to one party.  Texas has a presumption that appointing both parents joint managing conservators is in the best interests of the child(ren).

PARENT. “Parent” means the mother, a man presumed to be the father, a man legally determined to be the father, a man who has been adjudicated to be the father by a court of competent jurisdiction, a man who has acknowledged his paternity under applicable law, or an adoptive mother or father. The term does not include a parent as to whom the parent-child relationship has been terminated except that, for the purpose of establishing, determining the terms of, modifying, or enforcing an order, a reference in this title to a parent includes a person ordered to pay child support or to provide medical support or dental support for a child.

PARENTING COORDINATOR. “Parenting coordinator” means an impartial third party appointed by the court to aid the parties in:

  1. identifying disputed issues;
  2. reducing misunderstandings;
  3. clarifying priorities;
  4. exploring possibilities for problem solving;
  5. developing methods of collaboration in parenting;
  6. understanding parenting plans and reaching agreements about parenting issues to be included in a parenting plan;
  7. complying with the court’s order regarding conservatorship or possession of and access to the child;
  8. implementing parenting plans;
  9. obtaining training regarding problem solving, conflict management, and parenting skills; and
  10. settling disputes regarding parenting issues and reaching a proposed joint resolution or statement of intent regarding those disputes.

PARENTING FACILITATOR. “Parenting facilitator” means an impartial third party appointed by the court to aid the parties in all or some of the same areas as a Parenting Coordinator, but also appointed with the power to monitor the parents’s compliance.

PARENTING PLAN. “Parenting plan” means the provisions of a final court order (which may be based upon an agreement between the parties) that:

  1. set out rights and duties of a parent or a person acting as a parent in relation to the child;
  2. provide for periods of possession of and access to the child, which may be the terms set out in the standard possession order and any amendments to the standard possession order agreed to by the parties or found by the court to be in the best interest of the child;
  3. provide for child support; and
  4. optimize the development of a close and continuing relationship between each parent and the child.

POSSESSORY CONSERVATOR. The court shall appoint as a possessory conservator a parent who is not appointed as a sole or joint managing conservator unless it finds that the appointment is not in the best interest of the child and that parental possession or access would endanger the physical or emotional welfare of the child.  The Possessory Conservator has the same Rights of a Parent at All Times and the right to possession of the child(ren) consistent with the guidelines in the Standard Possession Order or an approved agreed parenting plan.

RIGHTS OF A PARENT AT ALL TIMES. Unless limited by court order, a parent appointed as a conservator of a child has at all times the right:

  1. to receive information from any other conservator of the child concerning the health, education, and welfare of the child;
  2. to confer with the other parent to the extent possible before making a decision concerning the health, education, and welfare of the child;
  3. of access to medical, dental, psychological, and educational records of the child;
  4. to consult with a physician, dentist, or psychologist of the child;
  5. to consult with school officials concerning the child’s welfare and educational status, including school activities;
  6. to attend school activities;
  7. to be designated on the child’s records as a person to be notified in case of an emergency;
  8. to consent to medical, dental, and surgical treatment during an emergency involving an immediate danger to the health and safety of the child; and
  9. to manage the estate of the child to the extent the estate has been created by the parent or the parent’s family.

RIGHTS AND DUTIES DURING PERIOD OF POSSESSION. Unless limited by court order, a parent appointed as a conservator of a child has the following rights and duties during the period that the parent has possession of the child:

  1. the duty of care, control, protection, and reasonable discipline of the child;
  2. the duty to support the child, including providing the child with clothing, food, shelter, and medical and dental care not involving an invasive procedure;
  3. the right to consent for the child to medical and dental care not involving an invasive procedure; and
  4. the right to direct the moral and religious training of the child.

RIGHT TO DESIGNATE PRIMARY RESIDENCE.  Even in cases where parents are appointed joint managing conservators, the court is required by law to appoint one of them the exclusive right to determine the primary residence of the child. The court may place restrictions on the geographic area in which the parent may designate the child reside.

SOLE MANAGING CONSERVATOR. Unless limited by court order, a parent appointed as sole managing conservator of a child has the following exclusive rights:

  1. the right to designate the primary residence of the child;
  2. the right to consent to medical, dental, and surgical treatment involving invasive procedures;
  3. the right to consent to psychiatric and psychological treatment;
  4. the right to receive and give receipt for periodic payments for the support of the child and to hold or disburse these funds for the benefit of the child;
  5. the right to represent the child in legal action and to make other decisions of substantial legal significance concerning the child;
  6. the right to consent to marriage and to enlistment in the armed forces of the United States;
  7. the right to make decisions concerning the child’s education;
  8. the right to the services and earnings of the child; and
  9. except when a guardian of the child’s estate or a guardian or attorney ad litem has been appointed for the child, the right to act as an agent of the child in relation to the child’s estate if the child’s action is required by a state, the United States, or a foreign government.

STANDARD POSSESSION ORDER. Texas law sets forth a standard possession order that is presumed to be in the child(ren)’s best interests.  The order varies based on the geographic distance between the parents’ residences.  You can read more about the Standard Possession Order here.

UCCJEA.  The Uniform Child Custody Jurisdiction and Enforcement Act provides for continuity in initiating, enforcing, or modifying child custody decisions by providing rules for deciding the proper forum for child custody issues when a child and/or the child’s parents have moved to different states.

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