Your unique family needs a unique will and trust. Using a simple plan for a unique family could cause problems for these unique family circumstances:
1. Single child. If your child inherits your assets, dies, and leaves everything you gave him or her to his or her spouse, and your child’s spouse remarries, the replacement husband or wife will enjoy the inheritance you left for your child. If you, your spouse, and your only child die in a common occurrence, and you have no contingent beneficiaries, state law will decide who inherits your property.
2. Family with 2 children. More children means sibling rivalry. There are consequences to your philosophy of either taking care of each child’s unique needs or dividing everything equally.
3. Big family. Leaving an inheritance for a lot of family members to share means that each share will be smaller. Consider whether life insurance is needed to increase the size of your estate so that you can leave a significant financial legacy to each of your many children.
4. Childlessness. If you and your spouse die in a common occurrence, and leave no descendants, and you have no contingent beneficiaries, state law will decide who inherits your property.
5. Stepfather. Most spouses want to leave an inheritance for their surviving spouse. The inheritance is usually meant to make sure the survivor maintains the same standard of living as when both spouses were alive. Community property states like Texas and New Mexico only allow the deceased person to give his or her half of the community property upon death. The other half is retained by the survivor. An inventory of the deceased spouse’s estate must be prepared and must designate which property was owned before the second marriage and which property was acquired after marriage. One mistake made by spouses in a second marriage is to forget to update beneficiary designations that leave everything to the biological children. A surviving spouse might receive less because the deceased spouse forgot to update his beneficiary designations.
6. Stepmother. Another mistake made in families with a step-parent is to leave everything to the surviving spouse without protecting the deceased spouse’s biological children’s inheritance. The deceased spouse’s biological children and their step-parent might grow apart – more distant – following the death of their parent. I have heard step-parents explain to me the reason for disinheriting their stepchildren was because the stepchildren grew distant and stopped calling and visiting.
7. Orphan. An untimely death and failure to name a guardian for minor children might leave those surviving minor children without a parent, without a guardian, or in the midst of contesting guardians. If the minor child’s parents to not name a preferred guardian, the court will not presume anyone to be a person who would act in the best interest of that child. This could result in the deceased father’s side of the family fighting the deceased mother’s side of the family for the right to be guardian of the minor child.
8. Guardian. A surviving parent might be required to petition the probate court to be appointed guardian of his or her own biological child as a prerequisite of collecting life insurance proceeds following the death of the deceased parent if the minor child was the named beneficiary of the life insurance policy.
9. Adoption. I have met with many individuals who claim to have an adopted child. My follow-up question is whether the adoption occurred through a court. Taking a child into one’s home and providing all of the care and support that a parent would provide does not count as a legal adoption. Without a legal adoption, the so-called adopted child has no right to inherit as a matter of law. Dying without a will (intestacy) could leave the so-called adopted child with no inheritance. The child might have an argument for adoption by estoppel, to prevent the personal representative from denying the child his or her right to inherit by intestacy.
10. Single parent. A single parent of a minor child should leave an inheritance to their minor child through a testamentary trust as well as name a guardian to make legal and medical decisions. A simple plan might not be the product of a well thought out trustee – someone knowledgeable enough to keep the books, budgeting, and investments for a trust. I see individuals appointing family members to serve as trustee. I ask whether the family member is being named because of gender, birth order, or because that family member is worthy of trust and responsibility.
The next time you think all you need is a simple will, remember the mistakes that simple plans make for unique families. Does your family structure require a simple will, trust, and estate plan; or does your family structure require a unique plan for your unique family?