Leaving everything to your spouse in the belief they will pass on an inheritance to your children does not always work out as you had hoped. This is especially true if you have a blended family. However, there are good options for providing for both your spouse and your children.
It's very common for people to make wills leaving everything to their spouses in the belief the inheritances will be passed on to their children when their spouses die. You may be thinking this makes sense, because you and your spouse are in agreement on the matter, you want to be sure your spouse has enough to continue your lifestyle should you die first, it gives your spouse the ability to adjust where the assets go in case of changing circumstances, and it just seems easier and faster than pondering more complex options.
Unfortunately, when a person leaves everything to their spouse, reality often unfolds quite differently from what they imagined. Often, their children never see an inheritance. And leaving everything to your spouse if you have a blended family where one or both of you have children from a previous marriage is almost a sure recipe for disaster. Let's find out why.
Why shouldn't I leave everything to my spouse?
There may be nothing left for your kids. You love your children and would do anything for them. But if you leave everything to your spouse in a simple will in the belief that your spouse will leave your children their inheritance, you may be disinheriting your children. You may think your estate is large enough for your children to receive an ample inheritance when your spouse dies years after you do, but life has a way of disrupting our plans. Your spouse could lose your assets in a million different ways. For example:
- Your spouse may not be as savvy about finances as you are and make bad investments.
- Your spouse may not be as frugal as you and spend unwisely. They could become addicted to home shopping networks or decide to drown their grief by buying a money-pit house that devours all your assets in its upkeep.
- They could be tricked out of their money and assets if they become increasingly confused as they age.
- They may just live beyond their means for years until finally your nest egg is gone.
Any of these scenarios and more could occur whether you have a blended family with children from previous marriages or a first marriage with shared children. The only difference is that the other biological parent of your children may be more motivated to protect assets for your children than a stepparent would.
Your spouse could remarry and leave everything to their new spouse. The result? Your children would probably not get an inheritance. For example, Jack and Jill have three children together. Jack leaves everything to Jill in his will, confident that Jill will take care of their children when her time comes. After Jack dies and following a suitable period of mourning, Jill remarries to a man named Bob who has his own four children. After years of wedded bliss or acrimony, depending who you ask, Jill dies having left everything to Bob including all the assets that Jack left to Jill. When Bob dies years later, he leaves everything to his own four children and nothing to the three children of Jack and Jill. So, all of Jack's remaining assets end up going to Bob's children.
Now assume that Jack and Jill, our original couple, each had children from previous marriages when they married. When Jack dies and Jill marries Bob, Jack's children from a previous marriage are even less likely to ever see any of the inheritance that Jack left to Jill in a simple will. After all, they are not Jill's children, and there is a good chance that Bob barely knew them if at all.
Whether Jack and Jill had a traditional marriage or a blended marriage, it's very dicey whether Jack's children will ever see a dime of inheritance. Once you leave everything to your spouse in a simple will, if you die first, you simply cannot assume that your children will ever get any of your assets on the death of your spouse.
Your second spouse could cut your kids out. In at least 40% of new marriages in the United States, at least one of the spouses was married before, so the special problems of blended families are not uncommon. You may think you have a loving blended family, but if you leave everything to your spouse and you die first, your kids may be left with nothing. Picture these possibilities:
- Your second spouse never really liked your children from your first marriage but put on a smiling facade for the sake of harmony. After your death, your spouse may have no problem willing all the assets to their own biological children and leaving nothing to yours.
- Your second spouse has good intentions, but in the years or even decades that go by after your death, your spouse may lose touch with your children. Maybe there is an occasional holiday card and maybe not. It begins to seem silly to the spouse to leave an inheritance to your children, since your spouse has not seen them for years. At this point, your spouse thinks of the assets you willed to them as their own. And, in fact, they are.
What are my options for protecting my children's inheritance?
Fortunately, you have good options for taking care of your spouse but still leaving something behind for your children. You will want to discuss the following solutions and others with your estate attorney, particularly if you have a blended family.
- Leave part of your estate to your spouse and part to your children.
- Create a trust for your spouse where your children get the remainder upon your spouse's death.
- Name your children as beneficiaries on life insurance policies or retirement accounts and will other assets to your spouse.
Leave part of the estate to your spouse and part to your children
You could, of course, just will part of your estate to your spouse and part to your children. Let's assume you give half to your spouse and half to your children. This ensures that your children get their inheritance, but will this leave enough for your spouse to get by? Only you can decide this after discussions with your spouse and your estate planning attorney. If you do leave your children an inheritance, depending on the circumstances, you may want to consider leaving it in a trust if your children are young or not financially savvy or if you have a large estate.
Create a trust for your spouse with the remainder going to your children upon your spouse's death
A trust is a far better vehicle than a will for enabling your wishes for both your spouse and your children to be carried out after you die. You can place your assets in a trust for your spouse with the remainder going to your children after your spouse passes. A trust can be tailored by your estate planning lawyer for your exact needs. For example, you could create a trust that gives your spouse all the money they want at any time, giving them the same kind of access they would have if you had willed the property to them directly. But you can also create a trust that limits how much your spouse gets and when they get it. When creating a trust, you may want to consider adding spendthrift provisions to prevent trust assets from being used to pay creditors of the beneficiary if you feel that is warranted.
Since the trust owns the assets rather than your spouse, your spouse can't will the assets to someone else such as a new spouse. Property ownership is clear, and there is no danger that your spouse's new spouse can make a claim on trust assets. In fact, you could make a provision that your spouse ceases being a beneficiary of the trust if they remarry.
You can name your spouse as trustee or you can name a third party, depending on what makes sense for your situation. And the good news is, if you set up a living trust, assets in your trust don't go through probate, so there is no waiting period for access to assets after your death.
Consider making your children beneficiaries of a life insurance policy or retirement accounts
Another way to provide for both your spouse and your children is to will most of your estate assets to your spouse but name your children as beneficiaries on a life insurance policy or on retirement accounts such as IRAs and 401(k)s. The benefits from these would go directly to your children as beneficiaries, because insurance policy benefits and retirement benefits arenot transferred through a will.
Have you thought through the ramifications of leaving everything to your spouse?
Everyone should speak with an estate planning lawyer about the most reliable ways to provide for their spouse and their children when they are gone. If you are part of a blended family and have children from a prior marriage, this is particularly important.