One of the absolute best parts of my job is working with families of all varieties. Love knows know boundaries.
However, the law does not care about who we love but only about how we are related. The default in the law is that unless you are biologically related or legally adopted, you will NOT be included.
This fact often times surprises and horrifies my clients when we walk through potential inheritance situations. This means that children and grandchild that we love with all of our hearts can be unintentionally disinherited if we are not careful.
The best way to illustrate this fact is to tell the story of Joe and Jane. Joe and Jane are in their 60s and have been married for 20 years. Joe has 2 children from a previous marriage Bob and Barb. Jane has 1 child from a previous marriage Suzy. Joe and Jane love all their children whether biological or not. They are one big happy family and have functioned this way for years.
Joe and Jane do not have any estate planning documents. Unfortunately, Joe is in an accident and passes away first. Joe and Jane owned a home worth $500,000. The home was deeded to Joe and Jane as husband and wife. Jane owns the home upon Joe’s death without any trouble. Jane is so distraught about Joe’s death that she continues to avoid the reality of drafting her own estate plan. Jane dies 6 months after Joe.
Since Jane did not have a plan, the law has one for her. Jane’s daughter Suzy files an action in probate court related to Jane’s estate. The judge MUST apply the default under the law because Jane had no other plan. The law states that Jane’s biological daughter Suzy inherits 100% of the home. Joe’s children and Jane’s step-children Bob and Barb get nothing even though Joe and Jane loved them the same as Suzy and even though Bob and Barb both worked hard for their home.
Suzy loves her stepsiblings and decides she wants to share the proceeds of the sale of the home with them. She sells the home for $500,000. However, if she goes to write checks to Bob or Barb, she now has to worry about getting hit with federal gift tax up to 40%. Suzy inherited the home without a tax problem. However, if she chooses to share now after mom and dad are gone, Uncle Sam will demand his piece of the pie.
This is a common and extremely heartbreaking scenario that can be so easily fixed by planning ahead. All Joe and Jane had to do was to draft the correct estate planning documents to override the default and ensure that the 3 children would share their inheritance.
When we fail to do planning in modern families, it means that we are taking a gamble on which spouse dies first and that will determine which child(ren) receive it all.
It is so easy to avoid these situations by working with a trusted legal advisor to proactively plan. This is the very type of planning that we assist families with daily here at MK Legal Planning.
This article is a production of MK Legal Planning. Michele Kelsaw, Attorney at Law, MBA, helps clients proactively plan to ensure their wishes are honored throughout life and beyond. We give our clients the confidence to know their loved ones will always be cared for in the way they want by the people they choose.
The first step in working with Michele is to schedule a Legal Planning Session. Contact Michele at (573) 578-2848 or email firstname.lastname@example.org to find out how you may obtain this session for no charge. Check out her blog at https://www.mklegalplanning.com/blog or email us to be added to her weekly email newsletter.
The choice of a lawyer is an important decision and should not be based solely upon advertisements. This publication is for informational purposes. Nothing in this publication is legal, financial, or tax advice. MK Legal Planning recommends that you consult with an accountant or other tax professional in conjunction with an attorney to form an advisory team. This publication does not create an attorney-client relationship with the firm or its attorney. © 2019 MK Legal Planning.