For too many of us, estate planning is the thing we’re always going to get to but often don’t. It’s like flossing, but with exponentially greater potential for harm. I understand why we procrastinate, believe me I do, but a failure to act in this department can have a devastating effect on your family.
Our financial planner had been after us to create an estate plan for a year; as we began preparations for an extended trip through Mexico, it seemed irresponsible not to have something in place. We contacted an attorney who came highly recommended, and blithely scheduled an appointment, with no clue as to the drama which would unfold over the two years it took us to finalize our will.
Those of us in a step family marriage face significantly greater challenges in this arena than a nuclear family. Beyond the obvious ones—like the fact that we are likely to be older when we remarry, which means that considerable assets may have been accrued on one or both sides prior to the marriage, and that some of those assets may be owed to or owned by a former spouse—there are the complex relationships between step, half, and biological children and their parents.
As with our marriage, my husband and I entered into the estate planning process, each with our own set of private expectations and desires. Our situation was further complicated by the huge disparity between our assets; he came with lots, I came with little. As a single parent, what little I had was earmarked for my daughter. As a single man, who had never been married and had no children, my husband had no idea to whom he wanted to leave his legacy, but he was pretty darn sure it wasn’t my daughter!
We had only been married for two years at that point. It was fair to say that we were struggling as a family. As my daughter hit puberty, her relationship with her step dad was rapidly deteriorating, which had a huge effect on his decision-making process. While he was undoubting in his commitment to me, financial and otherwise, he felt no such connection to my daughter. This was heart-breaking; not only because it was impossible for me to see how he couldn’t love her, but because my expectations for our marriage were still getting in the way of seeing what was a real, and in many respects, valid and logical set of feelings and actions.
I was near tears by the end of our first meeting with the attorney. She was well aware of my feelings; frighteningly, my husband was not. As each asset was discussed, he chose to designate his little-known nieces and nephews as secondary beneficiaries (I was first), rather than my daughter. Since he was bequeathing his fortune to me, he also insisted that I do the same with the few assets that I owned. We were literally bargaining with one another, which felt as distasteful as it sounds.
As I write these words, nine years later, his decisions make perfect sense to me. But at the time, I felt completely devastated. I was unable, though I consider myself to be a fairly pragmatic person, to see that he had every right to give his stuff to whomever he wanted. The estate planning process had become a parable for our marriage—two people who loved one another, but through repeated misunderstandings and a failure to effectively communicate, had become strangers, intent on defending themselves from what they perceived as a series of personal and vicious attacks. To see this in the cold light of day was very scary; I was very frightened at that point that our marriage might not survive. We left the attorney’s office with lots of home work; things that we needed to discuss and decide on before we could move forward. We attempted it a few times, but it was so volatile that we always ended up in a fight. Finally, we just buried it in our files, and didn’t touch it for another two years.
The good news is we finally completed our plan. Those two years of sitting on it proved to be highly beneficial to both our state of mind, and to the development of stronger relationships between step father and step child, and between husband and wife. We had all experienced great personal loss during that time—the death of a sibling and a parent— and as is so often the case, our priorities changed dramatically. We learned a lot along the way, and here are some things to keep in mind as you prepare for and navigate the estate planning process:
* I recommend that separate assets (property, retirement accounts, trusts, investment accounts, etc.) be kept separate for at least the first two years of marriage. The estate planning process requires a solid commitment to one another and to your respective children, and that may take time. Recognize that it may be appropriate to keep some assets permanently separate and consider a pre-marital or post-nuptial agreement to document that desire.
* Consider the use of a certified mediator to guide you through some of the tougher decisions before you meet with the attorney. It’s not only cheaper, but they are trained to help you find a compromise.
* Separate decisions about money from your emotions; and respect the rights of one another to disseminate your respective assets in the way you see fit. Hopefully, you didn’t marry one another for the money, so keep your priorities straight.
* It might be best to create two estate plans, and to use two different attorneys. Especially in the case where one partner brings significantly greater assets to the union, and/or where there are adult children from a former marriage, it may be preferable to keep things entirely separate. In the event that you use two different attorneys, however, it is essential that each be kept informed of the details of the other document, to prevent duplication or contradictions in your respective plans.
* If you use one attorney for your estate planning, there will be no secrets. Keep in mind that if your attorney is working for both you and your spouse, he/she is obligated to share all information with both parties.
* Creating a joint tenancy is a disaster for a blended family. In this situation, when one spouse dies, everything is owned outright by the surviving spouse. When the surviving spouse dies, the assets are passed to their heirs. Creating a trust, rather than a joint tenancy, gives you the option of having those assets revert back to the heirs of the spouse who died first.
* Recognize that things will change; this is a planning tool, and as such, requires periodic updating and fine tuning to keep up with the ebb and flow of life.
* Choose your executor/trustee wisely, and make sure they are up to the task. You may even want to consider co-executors, in the event that you are unable to agree on one person.
* Always address loans to adult children in your estate plan. Be very clear about what happens to loans after you are deceased. Will loans be forgiven? If there have been significant loans to some members of the family, and not to others, will that be taken into account when dividing assets? Nothing can set siblings against one another quicker than a lack of clarity (and perceived fairness) in your estate plan.
* Be mindful of when you choose to share details of the plan with your heirs. You never want to put your children in the position of ‘singing for their supper’, or setting half siblings in competition with one another, and your estate plan may change dramatically as your family dynamics stabilize. Once children are fully matured, however, it is a good idea to give them a copy of the document; make sure they receive updated versions as they occur.
I know this is a daunting task, but it can bring greater clarity to your financial goals and is the foundation for the financial security of your family.
I would like to acknowledge Ms. Bonnie Bishop, my empathetic and brilliant estate attorney, for her invaluable contributions to this article. Ms. Bishop practices estate planning law in Berkeley, California. Watch for Part 2 of Estate Planning for Stepfamilies on my next blog, which will address who needs an estate plan, and when and how you should proceed.