Estate Planning for Non-Traditional Families
The 2010 Census revealed that the traditional nuclear family, a family with married, heterosexual parents and two children, has disappeared at an alarming rate. What a drastic change from just sixty years ago when shows like “Father Knows Best” reflected family values where the male was the figurehead and the wife and kids supported him though diligence at home and diligence at school. Today, households like June and Ward Cleaver’s are the minority…they are not becoming the minority…they are the minority. Today’s reality is that such traditional families make up only 46% of homes according to a study by the Pew Research Center. That study also discovered that the decline of traditional families was fast and dramatic – beginning in 1960 when 73% of American families were traditional and continuing to 1980 when 61% of American families were traditional and culminating in the present 46% above-described. It is uncertain how much further the decline continued since 2010. This data means that approximately 54% of American households are non-traditional – those comprised of (1) single head of house households (mom or dad are single parents with children), (2) nonrelated households (parties living together as an unmarried couple), and (3) people living alone.
Other non-traditional estate planning issues continue to arise as the country addresses hot topics like the ever-increasing divorce rate and gay marriage. Blended families are on the rise. About 40% of all marriages terminate by dissolution and approximately 75% of divorced parties remarry. Thirty-seven states recognize gay marriage, and nearly 1.5 million babies a year are born to unmarried women – accounting for nearly one-third of all annual births. If any of these situations hit close to home, and you or a loved one reside in a non-traditional home, this article explores suggestions for creating your estate plan and taking steps to provide for your loved ones after your certain death.
1. Make Goals and Share Them with a Professional: It is never too early to plan and discuss your goals with an attorney, accountant, and financial advisor. Most young Americans start with few assets and low income so if you find yourself in that boat, you are not alone, but remember, you only receive one mortal life to live and should you fail to prepare an estate plan while alive, one cannot be created for you after you die. An experienced professional will always listen to your goals and seek to create a plan to assist you in reaching them. If you are part of a non-traditional family, you must begin any estate plan by making realistic goals and your goals are unlikely to mirror those of your parents or grandparents. Remember…plain vanilla estate plans are for the 46% of traditional families and do not always provide success in non-traditional families. Your non-traditional life requires a non-traditional plan that must be carefully crafted to address your specific and non-traditional needs. Will you be leaving assets to someone unrelated to you like your girlfriend, boyfriend, or partner? Will you seek to provide for children from a previous marriage while still allowing for some delivery of wealth to your present spouse and his/her children? Did you have a child out-of-wedlock and need to leave some money to the other natural parent in hopes he/she will take care of your child?
2. Missouri Intestacy Laws May Not Adequately Help Non-Traditional Parties Without a Plan: If you fail to create a plan, Missouri’s intestacy laws will provide a default method for distribution of your estate taking into account those closely related to you first and then looking for others related to you until full distribution occurs. However, such laws, specifically written for those without an estate plan, still envision distribution of property to include only those in a traditional family (between one woman and one man with one or more children) and miss the mark with regard to non-traditional families like yours. To that end, your non-traditional family is likely to suffer and the plans you took to the grave are buried with you. For example, your girlfriend, boyfriend, or partners in life are all excluded in Missouri’s intestacy laws. If your intention was to leave money to your church, neighbor, or the children of your girlfriend, boyfriend, or partner in life, they lose pursuant to Missouri’s intestacy laws as well. Finally, unadopted children, close friends, or others who may be your nearest allies at the time of your death are not addressed in Missouri’s laws.
3. Consider a Premarital Agreement (Prenuptials): Although the trend is rapidly changing, most people marry the first time with no children. An even greater amount of people marries for the first time with little to no assets. However, when they remarry (and many will going forward), they are likely to have children or grandchildren and enjoy ownership of assets such as real property, retirement accounts, businesses, and cash deposits. The truth is that second, third, and other subsequent marriages fail at a higher rate than original marriages, so prenuptial agreements are a critical part of any good plan. More specifically, a premarital agreement can do the following: (a) protect inheritance rights of children and grandchildren from previous marriages; (b) protect respective assets owned on the date of marriage; (c) limit spousal support should the marriage fail; and (d) protect the interests of older adults. The cost of a good prenuptial agreement is minor compared to the loss of those assets you worked your entire life to accumulate.
4. Consider Providing Your Significant Other Some Powers – But Not All of Them: Marriages fail at a rate of 40-45% and in those unions, parties thought they had found the love of their life and many promised to remain together until death in the presence of friend, loved ones, and others. Unmarried relationships fail at a much higher rate in large part because no such promise or contract is agreed upon. For this reason, you must carefully consider any decision to entrust your girlfriend, boyfriend, or partner in life with total authority over your estate and your person in the event of incapacity. Perhaps consider providing that person some limited powers to assist your estate in case of emergency and then appoint family members, professionals, or corporate parties more control until you marry or form a more legal and binding relationship? By doing so, if the relationship ends, you have a plan in place that survives their departure.
5. Consider a Trust and Not a Will By Itself: Wills are an incredible tool to dispose of your estate when you die and they are used with more frequency than Trusts because of their convenient cost; however, they are generally straightforward and leave little room for contingencies, longevity, or elaborate instructions. Through use of a Will, when you die, your property will pass to those you specifically name, and in most instances, they receive their inheritance within 6-12 months. For instance, if you want to leave all of your estate to your daughter, she will receive the net estate after probate in approximately one year if the amount exceeds $40,000 and sooner than that if your assets are defined as a small estate (also assuming no Will contests or lengthy claims against the estate occur). If your estate planning goals require lengthier and elaborate actions, a Will just will not cut it. For example, you want to leave an ongoing business or farm operation to your daughter and you do not want the going concern to be sold until she completes her education and marries the man or her dreams. Such complex planning requires a Trust. In another example, you have a disabled child who current receives public assistance and her receipt of your small fortune may cause her removal from all subsidy programs. In such a case, you may require a special needs trust through which you will afford her an income but in doing so you specifically require your trustee to pay only those amounts that allow her continued receipt of state and federal benefits. Or a remarried couple could pool all of their resources into a single joint trust for their benefit during their lives, with the residuary funds after they have both passed away to be distributed equally to their respective and unrelated children.
In summary, non-traditional families are on the rise and the decline of traditional families has been swift. There seems to be no end in sight to this trend. Without proper planning, non-traditional families suffer under current Missouri intestacy laws. A complete and well thought out estate plan is your only assurance that loved ones and friends will be taken care of after your passing. Seek out experienced counsel to assist before it is too late.
Todd Miller is the Senior Partner of the Law Office of Todd Miller, LLC in Jefferson City, Missouri. He received his B.S. with honors from Lincoln University in 1991 and his Juris Doctorate from the University of Missouri in 1999. He and/or his employers were recognized as Golf Tax Consultant of the Year by Boardroom Magazine for three of five years and Mr. Miller was selected as candidate for one of the “10 Best” Attorneys for the State of Missouri by the American Institute of Family Law Attorneys; one of the “10 Best” attorneys for the State of Missouri by the American Institute of Criminal Law Attorneys and one of the Nation’s Top Attorneys by The National Association of Distinguished Counsel. He formerly hosted a radio talk show entitled the “Mid-Missouri Legal Advocate” on KRMS News Talk 1150AM and 97.5FM. You may also find him on Facebook, Google+, LinkedIn, and Twitter.