Question: I am married to my second wife. Don't worry, I did get divorced from the first one before I got remarried. My question is how can I provide in my will for my wife during her lifetime, but insure that what is left over goes to my children after my wife dies? I also want to provide for my wife's children, but only after she is gone.
Answer: In a second marriage, it is not uncommon for the spouses to want to provide for each other during lifetime, but arrange for their assets to pass on to their children from a previous marriage after death of the surviving spouse. In some cases, the spouses even want to provide for all of their children. There are a number of options that might be utilized to achieve those goals.
The simplest option would be to leave everything to your surviving spouse, with the understanding that he or she will have a will or trust which distributes the assets remaining at his or her death to the children. That approach is probably the cheapest and simplest; however, it has a number of drawbacks.
Assets left to the surviving spouse could be subject to claims of creditors of the surviving spouse. Although the surviving spouse may not have any big creditors at the present time, all it takes is one automobile accident and a seriously injured plaintiff to create a big creditor problem. Illness, medical expense or other emergency may also deplete the assets.
Absent a prenuptial or post nuptial contract, the surviving spouse would have the power to create a will or trust which does not incorporate the informal agreement of the spouses. This freedom can be restricted by contract between the spouses; however, that poses its own problems. Many spouses do not want to admit that they do not trust each other. Others are too cheap to pay for drafting of a contract. And, even if a contract is prepared, it will probably not protect the assets from potential creditors of the surviving spouse.
The second alternative is to limit the interest transferred to the surviving spouse. That can be particularly effective with real estate, which by deed or will could be given to a surviving spouse for his or her life with a requirement that the real estate go to the children or grandchildren when the surviving spouse dies. This has its own drawbacks. It can create conflict between the surviving spouse and the heirs. If the surviving spouse needs to sell the real estate for living expenses or cannot afford to maintain it, the surviving spouse may be at the mercy of the heirs as they would have to corporate in sale.
The third alternative is to give assets to your children, with an understanding or contract that they provide for your surviving spouse from the assets they are given. That is probably one of the best ways to insure friction between your spouse and your children. It also suffers from the problem of exposing those assets to creditors of your children and even the improvidence of your children. Without a written contract, the children may well ignore your request that they take care of your spouse.
Because of these problems, it is most often suggested that a client place assets in a trust for the benefit of his or her spouse. The trust can be created by will or during your life and will generally provide that the assets in the trust are to be used for the benefit of your spouse during his or her life and at his or her death the remaining assets be distributed to named beneficiaries. The trust could provide for mandatory distribution of all income to the surviving spouse and discretionary distribution of principal and could even limit distribution to specific purposes (i.e. medical care, housing or travel).
Some of our clients want to build in even more flexibility. They want their spouse to have the right to pick who gets the remaining assets when both spouses have died. In some cases, the goal is to try and insure a good relationship between the client's children and the surviving spouse by providing that the surviving client's children will receive whatever is left in the trust but giving the surviving spouse a power to direct how much goes to each child in the surviving spouses will.
In any case, it is important to clearly write the rules and authorizations to avoid conflict.
In one recent case, Frank Timmins, Sr. created trusts in his will for the benefit of his wife, Myrtle Timmins. The trusts were generally for the benefit of Myrtle during her life and even gave Myrtle the right to remove up to $5,000.00 or 5% of the principal each year from each trust. At Myrtle's death, the trust assets were to be distributed equally to Frank Sr.'s children, who were defined in the will to be his natural and adopted children, and the children of his wife, Myrtle. Myrtle was also given power to appoint any part of the trust to Frank Sr.'s "then living lineal descendants."
Myrtle executed a document attempting to grant all of the principal and income to her four (4) natural children, cutting out Frank Sr.'s adopted children. Frank Sr.'s children filed suit.
At trial, the judge ruled that because the will defined "children" to be all of Frank Sr.'s natural and adopted children and the children of Myrtle, that Myrtle had authority to direct everything be distributed her four (4) children. The appellate court reversed by looking to the legal definition of lineal descendant. Lineal descendant is defined to mean a person in any generational level down the applicable individual's descending line. It includes children, grandchildren or more remote descendants. Adopted children are within the definition of lineal descendants. Stepchildren are not.
Even though the will defined children to include stepchildren, the grant of authority to award distribution of assets to lineal descendants used a different technical term. The appellate court concluded that Frank Sr.'s clear intent was to provide the ability to distribute assets differently to and among his adopted children, but not to his stepchildren.
The Timmins case is an illustration of the flexibility that can be used in wills and trusts. It also serves as a warning that precise language be used so that intent is clear. Although form books and even internet services abound in the estate planning arena, the Timmins case emphasizes the importance of retaining an experienced attorney to draft estate planning documents.