Living Trusts and Blended Families: Who Inherits What?

A recent situation for one of our clients points out the importance of creating a Living Trust, funding it—transferring all of your assets into the Trust–and then letting your loved ones know its whereabouts! This story involves a blended family, which has implications for a lot of people these days. With combined incomes, assets and heirs, it’s important to determine early on who’s going to inherit what.  

A Living Trust—but no one can find it

In this case, a woman married her husband in 2000. Prior to their marriage, he created a Living Trust that included the home in which she and her husband lived. He made it very clear to friends and family that the home would go to his wife when he died; unfortunately, this happened sooner than anyone expected. He died of a massive heart attack in 2014. Despite everyone’s efforts, no one could find any trace of the Living Trust.

It’s quite possible that the home’s title was never deeded into the Living Trust

This happens all too often—people are proactive about creating a Living Trust, but fail to realize that it’s not effective unless it’s funded—titles for all property need to be deeded to the Trust, and all investments, bank accounts, life insurance policies, etc. need to be transferred into the Trust. No one knows whether this was process was completed because the Trust was never found. 

The grandsons take over

Her husband had always had a soft spot for his two grandsons, both of whom had emotional and behavioral problems, and the boys had been living with them for several years, including at the time of their grandfather’s death. Empowered by the absence of any legal documents that would transfer the home’s ownership to the widow, these ungrateful 20-somethings were prepared to take over the home, forcing their step-grandmother to leave the house she had called home for 14 years.

An emotional and financial toll for a grieving widow

This is an unfortunate situation that’s going to end up in probate—a long, costly and emotional process. While this woman is grieving the loss of her husband, she is also faced with being thrown out of her home by her unappreciative step-grandsons. These kids have no legal grounds to evict their step-grandmother, so the right thing for her to do is to stay right there in the home where she had lived happily with her husband and wait for the legal process to take its course.

A blended family wakeup call

This is a wakeup call to other couples with children from previous marriages—and these days, when 50% of marriages end in divorce, this is a growing number. As people approach their second or third marriages, often later in life, there well may be prenuptial agreements that clearly address inheritance issues. These conversations about who will inherit what may be among the most difficult conversations that married couples may have, but it’s important to create legal documents that clearly identify the assets that each child will inherit.

Have you updated your Living Trust?

If you’ve remarried, it may be time for you and your new spouse to create or update your Living Trusts to reflect your new status. Talk to us at California Document Preparers. We have three convenient Bay Area locations.