No inheritance to evil stepson – Part 2
- Describing a workable and enforceable blended family estate plan can be achieved when wills are supported by an enforceable written agreement.
Last week I introduced Amanda who consulted about ensuring that her evil stepson would never inherit anything from her.
I explained how basic mirror wills are inadequate for ensuring that her and her husband Robert’s wishes are followed, those wishes being:
- When the first of them dies, everything ends up in the hands of the survivor, and
- When the second of them dies, their remaining wealth is split equally with Robert’s 50% share going to his son and Amanda’s 50% share going to a charity of her choice.
One glaring flaw arises after the first spouse dies and the second spouse has taken complete control of their combined wealth. Nothing stops that spouse from changing their will against the wishes of the spouse that has died.
This week I explain how a separate written agreement can make these wills much more secure and reliable.
It’s critical that this separate agreement be in writing. The law has established that a verbal agreement is insufficient.
Basic terms of the agreement
- No changing your will
The most basic term is that each spouse agrees not to change their will without the other’s consent or without reasonable notice that would allow the other to change their will as well.
- No bypassing the will
I’ve written several columns explaining how probate can be avoided by causing wealth to pass to your intended beneficiaries outside of your estate.
These same tactics can be used to render agreed beneficiary divisions in your will meaningless because your will governs only those assets that pass through your estate.
One tactic uses “joint tenancy”. You transfer assets so they are owned jointly by you and your intended beneficiary. If done properly, your name disappears from title on your death leaving your intended beneficiary as sole owner without the asset passing through your estate.
Another tactic is to put your wealth into investment plans where the investments pass directly to your intended beneficiaries through beneficiary designations within the investment documentation. I’m referring to investments such as RRSP/RRIFs, TFSAs, and segregated funds.
An even more direct way is to simply hand over your wealth to your intended beneficiary while you’re alive.
It is important that your agreement include terms preventing the use of these kinds of tactics.
- No unreasonable elimination of the inheritance
Amanda’s only wish is that her evil stepson never inherit her share of the wealth. She wouldn’t care if Robert carelessly blew the bulk of their combined wealth leaving very little to be divided equally between the evil stepson and the charity of Amanda’s choice.
But it’s important to Robert that their combined wealth be reasonably preserved so that his son ends up with as large an inheritance as is reasonably possible.
The agreement can include terms that give the surviving spouse access to the combined wealth to reasonably maximize their enjoyment of life and health while restricting them from being unreasonably wasteful.
- Protect against competing legal claims
If the surviving spouse moves on with their life and enters into a new relationship, their new spouse could gain rights to a share of Robert and Amanda’s combined wealth.
Robert will want to protect against this happening to maximize the amount of their combined wealth that will be left to split between his son and Amanda’s chosen charity.
The agreement can include terms requiring the surviving spouse to enter into a cohabitation or prenuptial agreement with the new spouse to give that protection.
Legal help a must
I provide “do it yourself” guidance when I can.
Estate planning for blended families is not a “do it yourself” legal matter.
I’ve described only one of several options a lawyer can help you consider to ensure your wishes will be carried out in a blended family scenario.
As common as blended families have become, it’s also a matter that requires increased legal expertise.
I strongly urge anyone in a blended family to consult with a lawyer who has estate planning expertise specifically related to blended families.
Next week, I will continue this topic by offering tactical suggestions that someone in Amanda’s situation might consider.
