Estate planning question

[joken]

A husband and wife each have two children from previous marriages, and one of the children dies. Should the parents both die, how is the estate divided? Should the estate be divided in thirds or half giving the sibling of the deceased child 50% and the other two siblings 50%?

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[Lilhigbee]

My opinion is that it would depend on the ages of the children when the couple got married. If they were young and raised together a 1/3, 1/3, 1/3 split would be appropriate, but if they were adults out of the house when the couple got married a 50, 25, 25 split would be fitting. Depending on the personalities of the children it could get very rewarding for a lawyer or three.

 

[aasbra]

I believe it would depend on what the will of the deceased parents state, or other governing instrument (a trust, for example). If no will or other governing instrument, then it gets more difficult. Remaining family, and courts to figure it out.

 

[ilikegunspdx]

A husband and wife each have two children from previous marriages, and one of the children dies. Should the parents both die, how is the estate divided? Should the estate be divided in thirds or half giving the sibling of the deceased child 50% and the other two siblings 50%?

I would say get an attorney to draft up will, durable power of attorney, medical directives. Don't leave anything to question or for the state or probate to sort out. Small investment will save tons of trouble and/or fighting for the heirs and make sure things are handled how you want it to be.

 

[joken]

I would say get an attorney to draft up will, durable power of attorney, medical directives. Don't leave anything to question or for the state or probate to sort out. Small investment will save tons of trouble and/or fighting for the heirs and make sure things are handled how you want it to be.

We are beginning the process, thanks

 

[monkeybutler]

A trust is better than just a will. Makes things much easier and typically avoids probate court.

 

[L84Cabo]

Parental wealth should follow the bloodline and stay in the family...IMO.

Let's say you and your wife each have $100K. If...God forbid...one of your children died, your $100K would go to your surviving child in its entirety. This goes for whatever you came into the second marriage with (obviously), as well as whatever wealth you accumulated together in the second marriage. That accumulated, second marriage wealth, gets divided in half and she can distribute her half to her family as she sees fit and you distribute your half to your family as you see fit.

What you really have to be careful with in these situations is that husbands and wives generally don't die at the same time. One dies first. So let's say you go first. And you may want whatever wealth you have accumulated during the marriage to continue providing for your wife until she dies. The problem here is that after you're dead, your wealth may transfer to your wife and when she dies, she wills EVERYTHING to HER kids...and yours get nothing. That happens A LOT. You have to be REALLY careful how that gets written up to ensure your kids don't get screwed. And even then there may still be a lot of ways she can siphon off money to her kids. Like maybe she decides to buy each of her kids a brand new car during the remainder of her life, after you're gone.

And hopefully your wife is a decent honest person and this type of thing isn't an issue. But people do lots of crazy things when money is involved and you're dead and gone.

You need a really good estate planning attorney.

Good luck...and may the odds be ever in your favor.

 

[joken]

Parental wealth should follow the bloodline and stay in the family...IMO.

Let's say you and your wife each have $100K. If...God forbid...one of your children died, your $100K would go to your surviving child in its entirety. This goes for whatever you came into the second marriage with (obviously), as well as whatever wealth you accumulated together in the second marriage. That accumulated, second marriage wealth, gets divided in half and she can distribute her half to her family as she sees fit and you distribute your half to your family as you see fit.

What you really have to be careful with in these situations is that husbands and wives generally don't die at the same time. One dies first. So let's say you go first. And you may want whatever wealth you have accumulated during the marriage to continue providing for your wife until she dies. The problem here is that after you're dead, your wealth may transfer to your wife and when she dies, she wills EVERYTHING to HER kids...and yours get nothing. That happens A LOT. You have to be REALLY careful how that gets written up to ensure your kids don't get screwed. And even then there may still be a lot of ways she can siphon off money to her kids. Like maybe she decides to buy each of her kids a brand new car during the remainder of her life, after you're gone.

And hopefully your wife is a decent honest person and this type of thing isn't an issue. But people do lots of crazy things when money is involved and you're dead and gone.

You need a really good estate planning attorney.

Good luck...and may the odds be ever in your favor.

Thank you, This is very helpful.

 

[Bacchus]

Joint Tenancy with Right of Survivorship (JTWROS) is one of three ways to set up your house deed. This one means the surviving spouse immediately owns the entire house, without the house going through probate. That is, if you have this on your deed you don't need to include your house in your will.

link

What you don't want in your case, and which appears to be the default ownership if you don't insist otherwise, is Tenancy in Common.

I am not an expert, CPA, or lawyer, but this is my understanding based on my own research. Any lawyers, real estate experts, or CPAs feel free to jump in and correct me.

Also be aware that your partner can change this without your knowing, from what I can tell.

 

[arakboss]

Speaking of wealth and inheritance.

https://www.cnn.com/2024/03/01/economy/millennials-richest-generation-in-history/index.html

 

[Provincial]

Speaking from experience, this is a difficult situation. It is impossible to control things from the grave, so establishing a mechanism for controlling the estate is critical. This gets more complicated as the number of heirs and their incompatibility increases.

Tradition has the surviving spouse being left with the entire estate, to do with as he/she wishes. Things like "credit shelter trusts" are a simple way to split the estate and preserve the part of the first to die, but control of that trust is key to it's preservation. If the surviving spouse (or someone with an ulterior motive) has control of that trust, it can be distributed in a way the Trustor (the deceased) never intended. It is better for a credit shelter trust to be managed by a trustworthy third party or all the heirs with limited discretionary powers.

The key is to decide in advance how you (the couple) want to distribute the estate, while providing for the surviving spouse. Then involve all of the heirs in managing the estate, as long as they can get along. If they are not likely to get along well, set up a trust that will manage things fairly, with a trustee that will follow the directions and ignore pressures from the heirs.

I have been told of estates that specify that if the heirs fight over the estate, the trustee is directed to liquidate the estate and split the proceeds using a predetermined formula. This is a "split the baby" solution, that may be unfair in some instances. Another option for an estate with an ongoing income is to establish a pre-determined price for an heir who wants out. This price is determined by balancing a fair split with what the business can afford, but because it is based on practicality, is likely to be much less than an ownership stake.

One way of discouraging fighting over an estate is to include a clause that cuts an heir out of the proceeds if they challenge the distribution. This isn't effective, as such clauses are often unenforceable, and actually are unfair if the estate isn't being distributed properly. It is better to set up a fair distribution and ways to enforce it that avoid legal wrangling.

If there is no need or desire to keep land or a business, liquidation is a good option, since money is easy to distribute in a calculated way. If you want one heir to get the house, have the estate value it and assign that value to the account of the heir that receives it. Valuing personal items that have monetary value, like jewelry, should be avoided by gifting them in advance, or listing them for distribution in the estate.

Remember, you will be gone when all this happens, so don't concern yourself about anything but what you think should happen. If you think one heir is more deserving than another, that is your option. You are trying to set up a distribution that cannot be changed, which will keep the heirs from fighting. If one or more of them thinks they have been treated unfairly, that is not your problem, and it is up to you to make sure that the other heirs are not burdened by the displeased heir challenging your decision.

It is unfortunately common for one heir (or even a trusted advisor) to establish control over the surviving spouse and divert the estate to their benefit. To prevent this, put limits on the power of the surviving spouse to change the estate after the death of a spouse. If holding the estate in trust(s), make all the heirs trustees, so any action of the trust(s) will be controlled by them. This is another good reason for using trusts.

On the subject of trusts: there are "revocable" trusts, which can be done away with by the trust-maker, and "irrevocable" trusts, which are permanent. If you change your mind, you can do away with the revocable trust, but not the irrevocable trust. Revocable trusts do not protect the assets from a judgement against the trust-maker, in that the Court can order the trust-maker to revoke the trust to make the assets available. An irrevocable trust is immune to this, but it is permanent.

Fights can happen if the estate isn't established in a way to discourage contention. I know of one trust that owns some timberland. There are now about 15 heirs involved. One wants to buy the land, which has all be harvested, and build a house. One wants to buy the land (using financing from in-laws) thinking it can be flipped for a profit. All the other heirs want to sell to the one that wants to build the house, but the "flipper" with 5% ownership is blocking the sale. This is why you need to avoid 100% agreement, but also 51% agreement, since either can result in unfair results.

Don't think that a law firm is better because it is big or has a "reputation." I know directly of a highly-regarded law firm that charged an elderly couple an obscene amount of money to set up a complicated trust that was supposed to save money on estate taxes. It didn't do anything that a simple credit shelter trust would have done for (at that time) about one thousand dollars. Not only that, but it didn't achieve the goals of the couple, and resulted in a long and expensive fight by the heirs.

Every estate is different. Some are simple, some more complex. Good advice is out there, but there is a lot of bad advice out there too.

I am not a lawyer. All I am giving is my observations from personal experience and being around other family experiences. Get good lawyer who will help you set up what you want. Be clear what you want, and what you want to protect against. Good luck!

 

[ilikegunspdx]

Speaking from experience, this is a difficult situation. It is impossible to control things from the grave, so establishing a mechanism for controlling the estate is critical. This gets more complicated as the number of heirs and their incompatibility increases.

Tradition has the surviving spouse being left with the entire estate, to do with as he/she wishes. Things like "credit shelter trusts" are a simple way to split the estate and preserve the part of the first to die, but control of that trust is key to it's preservation. If the surviving spouse (or someone with an ulterior motive) has control of that trust, it can be distributed in a way the Trustor (the deceased) never intended. It is better for a credit shelter trust to be managed by a trustworthy third party or all the heirs with limited discretionary powers.

The key is to decide in advance how you (the couple) want to distribute the estate, while providing for the surviving spouse. Then involve all of the heirs in managing the estate, as long as they can get along. If they are not likely to get along well, set up a trust that will manage things fairly, with a trustee that will follow the directions and ignore pressures from the heirs.

I have been told of estates that specify that if the heirs fight over the estate, the trustee is directed to liquidate the estate and split the proceeds using a predetermined formula. This is a "split the baby" solution, that may be unfair in some instances. Another option for an estate with an ongoing income is to establish a pre-determined price for an heir who wants out. This price is determined by balancing a fair split with what the business can afford, but because it is based on practicality, is likely to be much less than an ownership stake.

One way of discouraging fighting over an estate is to include a clause that cuts an heir out of the proceeds if they challenge the distribution. This isn't effective, as such clauses are often unenforceable, and actually are unfair if the estate isn't being distributed properly. It is better to set up a fair distribution and ways to enforce it that avoid legal wrangling.

If there is no need or desire to keep land or a business, liquidation is a good option, since money is easy to distribute in a calculated way. If you want one heir to get the house, have the estate value it and assign that value to the account of the heir that receives it. Valuing personal items that have monetary value, like jewelry, should be avoided by gifting them in advance, or listing them for distribution in the estate.

Remember, you will be gone when all this happens, so don't concern yourself about anything but what you think should happen. If you think one heir is more deserving than another, that is your option. You are trying to set up a distribution that cannot be changed, which will keep the heirs from fighting. If one or more of them thinks they have been treated unfairly, that is not your problem, and it is up to you to make sure that the other heirs are not burdened by the displeased heir challenging your decision.

It is unfortunately common for one heir (or even a trusted advisor) to establish control over the surviving spouse and divert the estate to their benefit. To prevent this, put limits on the power of the surviving spouse to change the estate after the death of a spouse. If holding the estate in trust(s), make all the heirs trustees, so any action of the trust(s) will be controlled by them. This is another good reason for using trusts.

On the subject of trusts: there are "revocable" trusts, which can be done away with by the trust-maker, and "irrevocable" trusts, which are permanent. If you change your mind, you can do away with the revocable trust, but not the irrevocable trust. Revocable trusts do not protect the assets from a judgement against the trust-maker, in that the Court can order the trust-maker to revoke the trust to make the assets available. An irrevocable trust is immune to this, but it is permanent.

Fights can happen if the estate isn't established in a way to discourage contention. I know of one trust that owns some timberland. There are now about 15 heirs involved. One wants to buy the land, which has all be harvested, and build a house. One wants to buy the land (using financing from in-laws) thinking it can be flipped for a profit. All the other heirs want to sell to the one that wants to build the house, but the "flipper" with 5% ownership is blocking the sale. This is why you need to avoid 100% agreement, but also 51% agreement, since either can result in unfair results.

Don't think that a law firm is better because it is big or has a "reputation." I know directly of a highly-regarded law firm that charged an elderly couple an obscene amount of money to set up a complicated trust that was supposed to save money on estate taxes. It didn't do anything that a simple credit shelter trust would have done for (at that time) about one thousand dollars. Not only that, but it didn't achieve the goals of the couple, and resulted in a long and expensive fight by the heirs.

Every estate is different. Some are simple, some more complex. Good advice is out there, but there is a lot of bad advice out there too.

I am not a lawyer. All I am giving is my observations from personal experience and being around other family experiences. Get good lawyer who will help you set up what you want. Be clear what you want, and what you want to protect against. Good luck!

Regarding fighting over the estate, just put in the will that if anyone contests the estate it shall be as if they never existed. Problem solved.

 

[Provincial]

Regarding fighting over the estate, just put in the will that if anyone contests the estate it shall be as if they never existed. Problem solved.

As I pointed out, that clause is often unenforceable. Also, what if the estate is being hijacked by the executor? I know of more than one case where such a clause was used as a defense by a miscreant, and fortunately in all the cases it was not enforced.

 

[ilikegunspdx]

As I pointed out, that clause is often unenforceable. Also, what if the estate is being hijacked by the executor? I know of more than one case where such a clause was used as a defense by a miscreant, and fortunately in all the cases it was not enforced.

Probably should talk to your estate planning attorney on that. Someone trying to become the executor is difficult and is a longer discussion than I'm willing to write about here. Again a good attorney can make that almost impossible. Went through this in a pretty much worse case scenario and it withstood all attacks. A good estate attorney is worth their weight in gold imo. I can recommend this guy, of course there are probably many others super sharp and knowledgeable estate/elder law attorneys out there.

Garvin Reiter, J.D., CELA* - Law Offices of Nay & Friedenberg LLC

Portland Attorney Garvin Reiter specializes in the areas of Elder Law • Medicaid • Estate & Inheritance Tax Planning • Estate Planning • Special Needs Planning • Conservatorships • Probate

naylaw.com

 

[Provincial]

I agree that it is hard once the estate is in the hands of the executor, but these cases usually involve "Undue Influence" and that changes the playing field. Once a heir is being cut out, or worse yet, subject to "ghost income" taxation, the threat of the contest clause is greatly reduced.

I am focused on pointing out the pitfalls for those leaving the estate. Setting things up right involves preventing misuse of the estate for personal gain. That is far more difficult than it looks.

 

[Certaindeaf]

Just make sure the executioner isn't dyslexic.

 

[Provincial]

Probably should talk to your estate planning attorney on that.

I can tell from first hand experience, that while at least one trustor is still alive, that clause is not insurmountable. Afterwards, yes, but "Undue Influence" is not protected.

 

[Jay Walk]

Timely, just set an appointment to meet with my attorney and look into updating the will and looking into a trust.

 

[monkeybutler]

Trusts deter dipstick relatives. sometimes that is a factor to consider. Often times perhaps.

 

[CountryGent]

A trust is better than just a will. Makes things much easier and typically avoids probate court.

^ This.