Blending Families: How to Ensure Equitable Inheritance for Your Kids in a Second Marriage

Question:

My spouse passed away several years ago and I’m about to marry for the second time. Both of us have our own assets and our own kids. Both sets of kids want to make sure they are not disinherited. How can we arrange our assets to make sure each of our kids receives an equitable amount?

Answer:
I’m sorry for your loss and congratulations on your upcoming marriage. Blending families and ensuring that each set of children is treated fairly can be complex, but there are several strategies you can consider to ensure that your assets are distributed equitably. Here are some steps and options to consider:

1. Prenuptial Agreement

A prenuptial agreement can outline how assets will be divided in the event of divorce or death. This can help protect the interests of both sets of children.

2. Separate Property

Keep certain assets as separate property rather than commingling them. This can make it easier to ensure that these assets go to your respective children.

3. Trusts

Trusts can be a very effective way to manage and distribute assets according to your wishes. Here are a few types of trusts to consider:

• Revocable Living Trusts: These can be changed or revoked during your lifetime and can specify how assets are distributed after your death.
• Irrevocable Trusts: These cannot be changed once established and can provide tax benefits and protection from creditors.
• Qualified Terminable Interest Property (QTIP) Trusts: These allow you to provide for your spouse during their lifetime while ensuring that the remaining assets go to your children after your spouse’s death.

4. Wills

Ensure that both you and your spouse have updated wills that clearly state how you want your assets to be distributed. This can help avoid any confusion or disputes later on.

5. Beneficiary Designations

Review and update beneficiary designations on life insurance policies, retirement accounts, and other financial accounts to ensure they align with your overall estate plan.

6. Life Insurance

Consider purchasing life insurance policies that name your children as beneficiaries. This can provide them with an immediate inheritance upon your death.

7. Joint Ownership with Rights of Survivorship

Be cautious with joint ownership, as it can override the terms of your will. Instead, consider other forms of ownership that align with your estate planning goals.

8. Consult an Estate Planning Attorney

Given the complexity of your situation, it’s highly advisable to consult with an estate planning attorney who can help you navigate the legal aspects and ensure that your estate plan is comprehensive and legally sound.

Example Scenario

Here’s an example of how you might structure your estate plan:

• Prenuptial Agreement: You and your spouse agree to keep certain assets separate.
• Revocable Living Trusts: Each of you sets up a trust that specifies how your assets will be distributed to your respective children.
• Life Insurance: You each purchase life insurance policies with your children as beneficiaries.
• Updated Wills: Both of you update your wills to reflect your current wishes.
• Beneficiary Designations: You review and update all beneficiary designations to ensure they align with your estate plan.

Next Steps

1. Consult an Estate Planning Attorney: They can provide personalized advice and help you draft the necessary legal documents.
2. Communicate with Your Children: Keep an open line of communication with your children to ensure they understand your plans and intentions.

Question:

We will live in Oklahoma, how would that impact our situation?

Answer:

Living in Oklahoma can have specific implications for your estate planning due to state laws and regulations. Here are some key considerations:

1. Community Property vs. Common Law State

Oklahoma is a common law state, not a community property state. This means that property acquired during the marriage is not automatically considered jointly owned. Instead, each spouse can own property separately, which can simplify the process of keeping assets distinct for inheritance purposes.

2. Spousal Elective Share

Oklahoma law provides for a spousal elective share, which means that a surviving spouse is entitled to a portion of the deceased spouse’s estate, regardless of what the will states. This is typically one-third of the estate. This could impact how much is available to bequeath to your children.

3. Probate Process

Oklahoma has a probate process that can be time-consuming and costly. Using trusts and other estate planning tools can help avoid probate and ensure a smoother transfer of assets to your children.

4. Homestead Exemption

Oklahoma provides a homestead exemption, which protects a portion of the value of your home from creditors. This can be an important consideration in your estate planning.

5. State Taxes

Oklahoma does not have an estate tax or inheritance tax, which can simplify the financial aspects of your estate planning. However, federal estate taxes may still apply if your estate exceeds the federal exemption limit.

6. Trusts and Wills

• Revocable Living Trusts: These can help avoid probate and provide clear instructions for asset distribution.
• Irrevocable Trusts: These can offer additional protection and tax benefits.
• Wills: Ensure your will is compliant with Oklahoma state laws to avoid any legal challenges.

7. Legal Assistance

Given the specific laws in Oklahoma, it’s crucial to work with an estate planning attorney who is familiar with Oklahoma state law. They can help you navigate the legal landscape and ensure your estate plan is robust and compliant.