One of the most challenging fact patterns when it comes to estate planning is the blended family, such as a couple who get divorced and there are children from later marriages.
This gets particularly difficult to plan for when minor children are involved.
The combination of step-children and minor children can result in some odd fact patterns. The Kelly v. Lobit, 142 S.W.2d 301 (Tex. Civ. App.–Galveston 1940, no writ.) case provides a fact pattern that is an example. In that case, the new husband ended up being the challenger of the former husband’s will.
Facts & Procedural History
Joseph Lobit, Sr. (the “decedent”) died in 1912, leaving a will.
The decedent was survived by his wife, Myrtle. The decedent and Myrtle had three children together.
Two of his children were named independent executors in the will. The children had the will admitted to probate in Galveston County.
One of the independent executor children lived in Harris County and the other lived in Galveston County.
The independent executors administered the estate for three years and did not file an inventory. There were several tracts of land that were not distributed from the estate.
The ex-wife and mother of the children brought suit in Harris County probate court for an accounting on behalf of her minor child (the independent executor’s sibling). The ex-wife died during this process and her new husband took over the suit as the executor of her estate.
The Harris County probate ordered the case to be transferred to Galveston County.
The appeals court ended up concluding that under the then-existing law, Harris County was proper venue as one of the independent executors resided there and, therefore he could be sued there.
Unpacking the Family Relationships
This case is an example of how the new spouse of a former spouse can end up challenging or even administering the estate of the deceased spouse.
The decedent’s will did not name the ex-spouse as the executor. It named the decedent’s adult children. Because there was a surviving minor child, this allowed the ex-spouse to bring suit. When the ex-spouse died, it allowed her new spouse to step into her shoes.
While the decedent may have preferred that his minor child be provided for, he may not have preferred that his ex-wife’s new husband be the party to enforce these provisions.
This also leaves open the possibility that the minor child may wait until they are 18 years old to contest the distributions, which is not ideal. Alternatively, as in this case, the minor may be represented by a guardian, which itself can be a hassle and expensive process.
Types of Blended Family Relationships
Blended families, also known as stepfamilies, are formed when two individuals with children from previous relationships come together to create a new family unit.
Blended families can take various forms, and the dynamics of their relationships can vary greatly depending on the individuals involved.
Here are some examples of blended family relationships that complicate estate planning:
- Parent-Stepchild Relationship
- Sibling Relationship
- Spouse-Ex-Spouse Relationship
- Co-Parenting Relationship
- Stepparent-Ex-Child Relationship
- Grandparent-Stepgrandchild Relationship
The concepts and concerns noted above can apply to any of these relationships.
How Can This Be Avoided
This type of result can be avoided by holding assets in trust or having the assets distributed to a trust. The trustee provisions would then dictate how the assets are to be managed, provide for regular distributions based on an ascertainable standard, say how and when records are to be provided, and provide for a clear line of succession in the trustee role.
The trust could also provide for separate shares and have a share for each child. This could also alleviate concerns about mismanagement, self-dealing, etc.
The Family Allowance & Exempt Property
From the minor’s perspective, he or she may also get a family allowance and set aside exempt property during the probate process.
Exempt property includes the decedent’s homestead, for example.
If the probate process is not closed and distributions are made for some time (as in this case), the minor may be able to enjoy the exempt property indefinitely.
This could prove costly for the estate, as the other heirs may have to foot the bill to maintain the exempt property, which would deplete their own inheritance.
From the minor’s perspective, this plus the ability to void or challenge events long after the fact, may provide some remedy.
Family Settlement Agreement
If the independent administrators were not diligent in distributing the assets as they were not satisfied with the distributions called for in the will, the parties might also find that a family settlement agreement may provide a remedy.
With this option, the parties could negotiate a different distribution that they may prefer. This might include a buy-out of the minor’s interest. If the minor was sufficiently young, even a small tax-free buy-out of assets (such as an investment in a deferred annuity) could allow compounding growth and an after-tax windfall for the minor once they are an adult. This type of arrangement could take advantage of the time value of money principles, inflation, and longer investment horizon to reach a win-win scenario for the parties. In this fact pattern, the siblings might get the use and enjoyment of the property now, at their age, and then the minor may get a large cash payment when they are an adult.
Blended families and minor children require careful consideration in estate planning to ensure smooth transitions and minimize potential conflicts. Simply naming children as executors in a standard will may not be the most suitable approach, as demonstrated in this case. Utilizing a will-drafted trust can provide added protection and help prevent disputes. In addition to will-drafted trusts, there are various resolution techniques that can be employed during or after the probate process to address disputes or potential litigation. Examples of such solutions include exempt property provisions and family settlement agreements. These mechanisms can play a crucial role in reaching fair resolutions and maintaining family harmony during challenging times.
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