Why Revocable Trusts are Essential for Blended Families

Whether your blended family involves joint children, children from a prior marriage, multigenerational famlies, or the introduction of a new spouse of either parent, blended families come with their own set of unique challenges. This is why estate planning is important for blended families.

What happens to my assets if I die without an estate plan in Oregon?

Assets with a named beneficiary (for example, a life insurance policy, bank account, brokerage account etc), or in some cases, assets owned jointly with someone, do not need to go through probate for it to be transferred. Assets that you own solely and without a designated beneficiary generally do need to be probated.

If you die without a will, your assets will pass through the Oregon laws of intestacy. This means that if you have a surviving spouse, your assets generally go to your spouse. However, if you have children from another relationship, Oregon law directs half of your assets to your spouse and the remaining half be divded evenly amongst all your children.

If you died without children but you have surviving parents, your assets will go to your surviving parents in equal shares.

If you die without surviving children or parents, your assets will go to your surviving siblings, with the right of representation by the sibling's children, for the sibling who died before you.

The rules of intestacy continue on but most people will have heirs in the scenarios shown above.

What Happens if I Remarry and Adopt Children?

Adopted children are treated the same as biological children for the purposes of inheritance via intestacy. However, if you have step-children, your step-children will not inherit under Oregon laws of intestacy if they were never adopted. If your intent is to provide for your step-children, you can achieve this goal by leaving them an inheritance in your estate plan.

What Happens at my death if My Partner and I Bought a House Together?

One would think that if you and a non-married/non-registered domestic partner bought a house together, the surviving partner would inherit the house outright at death. After all, this is true for married spouses. Oregon law presumes that real property owned by a married couple own it with the right of survivorship. This means that when the first spouse dies, the surviving spouse owns 100% of the house automatically.

However, if you and your partner were not married, each of you own 50% of the property unless the deed specifically states otherwise. If your partner dies without a will, 50% of the house will go through Oregon's laws of intestacy. This means you could end up co-owning the house with your partner's heirs in fractional shares. Now you'll need go through probate to settle the inheritance and buy out the shares of your partner's heirs in order to keep the house. You can just imagine the cost and headache this will be. All this can be avoided with early and proper planning.

How does a Will or Trust Help When Contemplating Divorce?

One of my clients came to me because she was contemplating divorce from her spouse of 20 years. Her spouse is a high income earner and they have children together. To protect her children's inheritance, she wants to set up a trust that will protect her children's inheritance in the event of his remarriage or future children with another partner.

A revocable living trust could possibly accomplish that goal if assets are moved to a trust that is owned by her and managed by her alone as trustee. There also are other estate planning tools such as irrevocable trusts that could protect her children. Irrevocable trusts will require more maintenance, funding assistance, additional tax filings, and on-going trust administration fees but for some with sufficient income & assets, this peace of mind is worth the expense.

Finally, a will is useful for capturing assets not included in the trust, and ensures that those assets be inherited by the children or transferred into the trust upon death. In the case of minor children, the trust can hold the funds on behalf of the children until they reach a certain age.

How Does a Will or Trust Help in Other Tricky Family Situations?

Estate Planning documents direct how your assets are to be distributed upon your death. It can be be as specific and creative as you need to carry out our wishes, and you can leave your inheritance to anyone you want.

Here's an example of a family who immigrated here in the '80s. The kids are American born citizens and have had the benefit of the education and opportunities here in America. To support their children, the parents took on multiple jobs as cooks, laborers, hotel cleaners, garment workers, and other menial work and worked 7 days a week until their children all went to college. Now, their children are sucessful contributing members of society. Due to repeated injury and age, the parents been out of work for the past ten years. They're not retired in that they do not have enough in savings to live without working. However, knowing how much their parents sacrified and supported their education, they gladly support their parents financially and intend to continue supporting their parents financially for the rest of their parents' lives.

During the early days of the Covid-10 pandemic, one child, a medical professional, worked on the front lines. She re-used her only n95 mask until it fell apart because there were no other available mask at the time. If she had died at that time without a will, her spouse would have inherited 100% of her estate. While she hoped that her spouse would honor her wishes, there is no obligation or guarantee on her husband's part to carry through with the financial support. If a main purpose is to provide for the continued financial support of one's parents or other dependant, than it is especially important to have a will or trust in place. A will or a trust can ensure that your loved ones are provided for according to your wishes.

Estate planning is important for protecting your loved ones and ensure that they are provided for as you intend.