Divorce during people’s middle ages and beyond has become so common in today’s world that the phrase “gray divorce” was coined to cover the new trend. Today, roughly one in four divorces involve those over 50, and divorce rates for this demographic have doubled in the past 30 years, according to the study Gray Divorce Revolution. For those over age 65, divorce rates have tripled.
With a gray divorce, the financial fallout can be quite devastating. Indeed, Bloomberg.com found that the standard of living for women who divorce after age 50 drops by some 45%, while it falls roughly 21% for men. With such a significant decrease, paired with a growing life expectancy, it is no wonder that many divorcees choose to remarry.
As a result, there has been a rise in blended families, where children from previous marriages are brought into the new union. It is a good idea for all adults over age 18 to have some basic Wills and Trusts planning in place regardless of age or marital status, but for those with blended families it is absolutely vital.
A blended family without an Will and Trust, or a plan that has not been properly updated, are at major risk of accidently disinheriting a loved one. Such planning mistakes are almost always unintentional, but a simple oversight could still lead to terrible consequences.
To illustrate how such a tragedy could occur, we’ll go over three different hypothetical scenarios. From there, we’ll look at how these negative outcomes can be easily avoided using a variety of different planning solutions.
Scenario #1: Accidentally disinheriting your children from a previous marriage
John has two adult children, David and Alexis, from a prior marriage. He marries Moira, who has one adult child, Patrick. The blended family gets along well, and because he trusts Moira will take care of his children in the event of his death, John’s Will and Trust leaves everything to Moira.
After just two years being married, John dies suddenly of a heart attack, and his nearly $1.4 million in assets go to Moira. Moira is extremely distraught following John’s death, and although she planned to update her plan to include David and Alexis, she never gets around to it, and dies just a year after John. Upon her death, all of the assets she brought into the marriage, along with all of John’s assets, pass to Moira’s son Patrick, while David and Alexis receive nothing.
There are several planning options John could’ve used to avoid this outcome. He could have created a revocable living trust that named an independent successor trustee to manage the distribution of his assets upon his death to ensure a more equitable division of his estate between his spouse and children. Or, he could have created two separate trusts, one for Moira and one for his children, in which John specified exactly what assets each individual received. He might have also taken advantage of tax-free gifts to his two children during his lifetime.
Whichever option he ultimately decided on, if John had consulted an experienced Wills and Trusts planning attorney like us, he could have ensured that his children would have been taken care of in the manner he desired.
Scenario #2: Accidentally disinheriting your spouse
Mark was married to Gwen for 30 years, and they had three children together, all of whom are now adults. When their kids were young, Mark and Gwen both created wills, in which they named each other as their sole beneficiaries. When they were both in their 50s, and their kids had grown, Bob and Gwen divorced.
Several years later, at age 60, Bob married Veronica, a widow with no children of her own. Bob was very healthy, so he didn’t make updating his Will and Trust a priority. But within a year of his new marriage, Bob died suddenly in a car accident.
Bob’s Will and Trust, written several decades ago, leaves all of his assets to ex-wife Gwen, or, if she is not living at the time of his death, to his children. State law presumes that Gwen has predeceased Bob because they divorced after the will was enacted. Thus, all of Bob’s assets, including the house he and Veronica were living in, pass to his children. Veronica receives nothing and is forced out of her home when Bob’s children sell it.
If Bob had worked with an Wills and Trusts planning attorney to create a living trust, he could have arranged his assets so they would go to, and work for, exactly the people he wanted them to benefit.
For example, if he wanted the bulk of his assets to go to his children but didn’t want to cause any disruption to Veronica’s life, he could have put his house, along with funds for its maintenance, into the trust for her benefit during her lifetime, and left the remainder of his assets to his kids. This would allow Veronica to live in and use the house as her own for the rest of her life, but upon her death, the house would pass to Bob’s children.
Scenario #3: Allowing Assets to Become Depleted
Steve is a divorcee in his early 60s with two adult children when he marries Susan. Steve has an estate valued at around $850,000, and he has told his kids that after he passes away, he hopes they will use the money that’s left to fund college accounts for their own children. But he also wants to ensure Susan is cared for, so he establishes a living trust in which he leaves all his assets to Susan, and upon her death, the remainder to his two children.
Yet, soon after Steve dies, Susan suffers a debilitating stroke. She requires round-the-clock in-home care for several decades, which is paid for by Steve’s trust. When she does pass away, the trust has been almost totally depleted, and Steve’s children inherit virtually nothing.
An experienced Wills and Trusts planning attorney like us could have helped Steve avoid this unfortunate outcome. Steve could have stipulated in his living trust that a certain portion of his assets must go to his children upon his death, while the remainder passed to Susan.
Additionally, Steve might have used life insurance to provide cash for Susan’s care upon his death, or he could have purchased a second-to-die life insurance policy for himself and Susan, naming his children as beneficiaries. Such a policy would ensure that regardless of the amount remaining in the trust, Steve’s children would receive an inheritance upon Susan’s death.
Bringing families together
Along with other major life events, entering into a marriage always requires you to reevaluate your Will and Trust, no matter how many times you have previously been married. Furthermore, updating your plan is exponentially more important when there are children involved in your new union.
As your Personal Family Lawyer®, we are specifically trained to work with blended families, ensuring that you and your new spouse can clearly document your wishes to avoid any confusion or conflict over how the assets and legal agency will be passed on in the event of one spouse’s death or incapacity.
If you have a blended family or are in the process of merging two families into one, contact us, as your Personal Family Lawyer®, today to discuss all of your options.
This article is a service of Levi Alexander, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.