Step-Families Create Unique Issues in Estate Planning

As estate planning changes for same-sex couples dominate the news after the recent U.S. Supreme Court ruling, it will be interesting to see how lower courts rule as each issue in these relationships arises.  When courts are faced with a new social structure, it often takes some time to sort out the legal issues that go with it.  Courts are still struggling with estate planning issues for families that include “step” relatives.

Recent surveys show that close to half of Americans have a “step” in their family.  Whether a stepparent, stepchild, “step sibling” or other, these blended families have created a tangled web of issues in estate planning.  One recent case decision illustrates the pitfalls that can occur when a family faces these issues.

In this case, the maternal grandparents had created two trusts for their grandson Matthew.  In the trust, the grandparents named the “brother and sisters” of Matthew as contingent beneficiaries, so if something happened to Matthew, his siblings would have the benefit of the trust.  Later, Matthew’s mother Cindy divorced his father Greg, who later remarried and had two more children with his new wife.

Unfortunately, Matthew died in 2011 at the age of 25.  He wasn’t married, had no children and he didn’t have a will.  Under the language of the trusts, the court decided that Greg’s children with his second wife were “brothers and sisters” of Matthew and should have the benefit of the trusts.  The grandparents argued that their intention was only to include lineal descendants, or those from their blood line and their daughter’s.

Fortunately, in this case, the state’s Supreme Court allowed a “reformation” of the trusts based upon the grandparent’s testimony of their intentions.  But, had the grandparents been deceased, they wouldn’t have been able to present this testimony.  This case teaches two lessons: (1) when “life events” happen in a family, such as marriage, divorce and remarriage, make sure to consult an estate planning attorney to review any changes that should be made to your estate plan and (2) consult an estate planning attorney to draft your documents carefully and make sure that your intentions are clear.