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Friday, September 9, 2016

Trust Planning for Your Blended Family

Summary: Estate planning for blended families --- couple with children from prior relationships --- can be especially challenging. An estate plan should provide for all of the couple's goals, including means for supporting the longer-living spouse and also protecting the legacies of the loved ones of the spouse who dies first. An estate plan that utilizes separate revocable living trusts for each spouse may benefit some families by allowing them to protect everyone involved.

Here in 2016, families come in more shapes, sizes and varities than ever. Especially among older people, the likelihood is higher than ever that their families will involve children from prior marriages or relationships. Whether your blended family's relationships mirror TV's "The Brady Bunch" or your family has a dynamic that is more complicated and difficult, estate planning is very important to ensure that the wishes you desire are carried out after you pass. A recent court case from Florida exposes why it is vitally important, not only for belnded families to plan, but to ensure that they have a sufficiently careful plan to protect everyone.

In that Florida court case, a lawsuit erupted over the estate plan of Dennis and Betty Dowdy. The couple each had children from prior relationships, but had none together. The Dowdys created an estate plan that included the Dowdy Family Trust. The couple named themselves as the initial trustees and beneficiaries of the trust, which held certain real estate properties. The couple's plan stated that, when the first spouse died, the survivor became the sole trustee. After both passed, the plan named one of the wife's children, Deborah Andrews, and one of the husband's children, Michael Dowdy, as co-successor trustees.

The problem arose three years after the husband died in 2008. The wife, acting as sole trustee, removed the husband's children from the trust, both as successor trustees and as beneficiaries. She then proceeded to sell the trust's remaining assets and took sole possession of the proceeds of that sale. The husband's son went to court, asking the court to invalidate the actions his stepmother had taken by herself. He argued to the judge that the trust automatically became irrevocable the moment his father died. 

The court ruled in favor of the wife. The way the trust was written, in the court's opinion, meant that it only became irrevocable after the death of both spouses, not merely after either one of them passed away. This meant that, after the husband's death, the wife was the sole trustee of the trust with total control over the trust. Her actions in removing the husband's children and selling trust assets were completely legal.

Was this the outcome that the husband would have wanted? We can only guess, but it seems unlikely. That's why it is so important to make sure that your estate plan is crafted in a way to protect you and your family. Trusts can be wonderful instruments in helping to escape probate or some tax obligations. However, your trust planning should be detailed enough to avoid potential pitfalls like the one that ensnared the family in this Florida case. One way to protect yourself and your family is by using multiple trusts. A separate revocable living trust for each of the husband and the wife can provide the probate-avoidance benefits that come with using trusts, and can allow you to ensure that the spouse who lives longer is properly supported during her lifetime while, at the same time, allowing each spouse to have the peace of mind of knowing that, if he should die first, his children and other loved ones will not ultimately find themselves frozen out of the estate's wealth.

This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at

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