Estate Planning Challenges in Blended Families
A recent article in the “Social Q’s” column of the New York Times dealt with whether a father should leave his three sons different amounts in his will. The father explained that the mother of two of his sons from a previous marriage was financially comfortable and would likely leave them with a comfortable inheritance. The mother of his third son wasn’t well off, and that son probably wouldn’t receive much of an inheritance from her. The father also noted that he loved all his sons equally and wanted to create a fair estate plan. But he wondered if he should leave more money to the third son. The columnist advised the reader to divide his assets equally among the three sons.
I spoke with Sandra Glazier of Sandra D. Glazier PC in Troy, Mich., about some of the challenges that can affect the decision in this situation and how to advise clients on this type of issue. Here’s what she had to say:
A Common Scenario?
Glazier said in a society where it’s reported that somewhere between 40% to 50% of first marriages end in divorce, with a much higher percentage attributable to second marriages ending in divorce, it isn’t uncommon for one parent to have a larger estate to dispose of at death than the other. Blended families create their own unique set of issues for consideration when creating an estate plan. Children tend to measure a parent’s love by how they are treated in the parent’s estate plan. It isn’t safe to assume that a parent won’t need assets for their own support, be the object of financial abuse or give their estate away to others, including charities. It’s impossible to know what a former spouse will ultimately leave to their children in common. The former spouse might assume that their mutual children won’t need to inherit from her because the other parent has a considerable estate and will provide sufficiently for their children.
Fair Is Better When Possible
Glazier agreed with the advice given by the columnist to the father to divide his assets equally. The father should create a plan separate from that of his former spouse, based on what he wants his children to receive from his estate. Treating children differently can not only lead to litigation but also hard feelings among the siblings. If preservation of relationships among his sons is important to him, equal treatment (to the extent it comports with his estate-planning desires) is recommended.
While the father could certainly include an equalization clause that offsets amounts inherited from either his current spouse or former spouse, what if he predeceases either or both of them? This alone could result in disparate treatment of his children. While Glazier often has parents include an equalization clause, a provision that treats inter-vivos gifts as an advancement or allocates unpaid loans to the borrowing child’s share so that the children are treated equally, those provisions generally relate to gifts or inheritances provided by the client or a couple who don’t have children from other relationships.
Reasons for Different Treatment
Glazier pointed out some reasons when it may be better to treat the children differently. These include:
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One child has special needs
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Some of the children have had their higher education expenses paid, while others haven’t
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One child is a spendthrift.
Additionally, if there has been a rift in the family (that’s not the result of undue influence) that has severed the parent-child relationship, or a child has forgone business opportunities to stay and take care of a parent without compensation, there may also be a reason that a parent might wish to treat children differently. In such instances, including a statement of intent or a separate letter of intent can help clarify the parent’s rationale for treating the children differently; however, this doesn’t guarantee that those differences won’t cause strain in the sibling relationships or lead to litigation. It can help if the father discusses his rationale for treating his children differently with them while he’s alive. However, many clients avoid having that discussion out of fear that it could impact their own relationship with their children.