Estate planning tips for blended families

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Careful estate planning may help people prevent inheritance disputes between their new spouses and their children from prior marriages upon their passing.

It is fairly common for people in Pennsylvania to remarry after a divorce, and often, one or both spouses may have children from a previous relationship. While these blended families offer people new opportunities to love and live, they can pose some challenging estate planning and inheritance issues. Therefore, having a carefully thought out estate plan that takes into account their new spouses’ needs, as well as those of their children’s, may help people prevent family disputes following their deaths.

Review beneficiary designations

The way people list their beneficiaries on retirement accounts, life insurance policies and other such accounts will affect how these benefits are disbursed upon their deaths. For example, it is common for people to update their beneficiary designations to their new spouses upon getting remarried. However, if they name only their new spouses, then they are able to specify their own new beneficiaries. This means that the original policy holders’ children may be bypassed altogether.

As such, people should make their intentions clear when designating their beneficiaries. They may name who the accounts should pass to after their spouses’ deaths or indicate specific percentages that each of their beneficiaries should receive.

Designate specific property separately

People often have family heirlooms or cherished personal property that they intend to pass on to certain children. Without a carefully designed plan, however, AARP points out that their new spouses may be entitled to claim up to half of the assets in people’s wills. Thus, it may be helpful if people leave a separate list of this property, sometimes referred to as a personal property memorandum. This list should describe each item to be gifted in detail and provide specific instructions as to who should receive each item upon their passing.

Consider inheritance timing

For couples who have not previously been married, inheritance timing is somewhat easy. People often leave their assets to their spouses, and their estates are passed on to their children after their spouses pass away. When it comes to second or subsequent marriages, however, withholding distributions of their children’s inheritances until after the death of their new spouses may create hostility and impatience. Therefore, people may consider establishing trusts or outright transfers that occur at the time of their deaths in order to accommodate the needs of both their surviving spouses and their children.

Working with an attorney

In the ideal situation, people in Pennsylvania could rely on their spouses and their children to work out inheritances to all their benefit after they pass away. However, even in long-term second marriages, new spouses and children from prior marriages may have drastically different ideas of what they are entitled to. As such, it will benefit people who have remarried or who are planning to get remarried to seek legal guidance. An attorney can explain their rights, including establishing wills and trusts, and help them set up a plan that provides for the needs of both their current spouses and their children from prior marriages.

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Where to File for Adoption

An adoption petition can be filed in a number of places depending on the circumstances of your case. Pursuant to 23 P.A. CS 2302, an adoption may be brought in the county where the parent(s) reside, where the adoptee resides, where an office is located for an agency having custody of the adoptee, or with leave of court, where the adoptee formerly resided. Section 2301 dictates that each county shall exercise jurisdiction through the appropriate division for adoption matters. In Pennsylvania, it is the Orphans’ Court that regularly handles adoption matters. In New Jersey, it is the Surrogates’ office.

Each county has their own local rules and forms to be used in an adoption matter. Additionally, each county sets their own fee schedule in terms of what filing fees will be due and for which pleadings. The cost and procedure for a home study, where necessary, also varies by county. Finally, the wait for a hearing is longer in some counties than others based on the overall volume of cases to be heard and the number of sitting Judges. All of the above may be reasons to consider in determining where to file an adoption petition.

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Adoption Hearing

One of the final steps in the adoption process is the adoption hearing. The hearing is often ceremonial in nature. It is common for family and friends to attend along with the prospective adoptee parents. The adoptee(s) must be present as well. At the hearing, the Petitioners should be prepared to show all legal requirements for an adoption have been met. Any documents that were attached to your original petition or subsequently filed with the court should already be in the court file (i.e. original birth certificate, background checks, home study report.) Additional requirements may include service on the opposing party in which case you should be sure to have valid proof of service with you for your hearing.

As adoption is permanent, there are some questions to make sure the prospective adoptive parents understand exactly what they are taking on. For example, prospective parents will be asked if they understand the adoption confers all the legal rights and duties between a parent and child that the law provides for natural born children. Those rights and duties include, but are not limited to, the right of the child to inherit through you and your family, the legal obligation to financially support the child, the right of the child to seek support from you, the principle that these rights and duties would continue if you and your spouse separate or divorce as well as if the child develops any physical, psychological problems or becomes ill or disabled for any reason in the future.

The Judge presiding over the case will often allow for pictures at the conclusion of the proceedings. As a family member or friend, you can bring gifts or card however, the court has a strict no balloon policy. After receiving the final decree of adoption, you can follow up with getting a new birth certificate for the adoptee.

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What If Your Ex Hid Money During the Divorce?

While the law requires both spouses to disclose all assets and liabilities with an accurate estimation of value for distribution between spouses, it’s not uncommon for someone to try to hide the actual worth of their property.

This is, of course, illegal. But if the lie isn’t caught, the lying spouse gets to keep more of his or her money. The other spouse thus gets less money at settlement and also possibly less child support or alimony.

Common ways to hide property

There are many creative ways to hide money from your spouse, and those of us who have been in divorce law for a number of years have seen some surprising schemes. But most people try one or more of the following:

  • Transferring real estate or other property into the name of a friend or family member
  • Making large purchases to resell at a premium after the divorce
  • Asking friends or family to hold onto valuables like art or jewelry, to be collected after the divorce
  • Hiding cash away, either under the proverbial mattress or in an account or box in someone else’s name – via a large cash withdrawal from a joint account, many small withdrawals over a period of time, or unreported income from a cash business
  • Deflating one’s income. A self-employed person can easily do this with creative bookkeeping, or a boss might agree to a temporary demotion or false reporting. The spouse might also add more to the 401K or inflate withholdings
  • Postponing of income until after the divorce. This could be by asking the boss to delay a bonus or by not submitting reimbursement reports in a timely manner
  • Depositing and then withdrawing money from children’s custodial accounts
  • Paying off phony debts to a friend or family member
  • Understating the value of property
  • Hiding money or property offshore
  • Overstating debts

What to do if you suspect dishonesty

It’s best to catch this sort of illegal behavior during the divorce proceedings, because the spouse who suspects cheating can petition the court to subpoena the employer for all employee records as well as the banks for all their information.  After the divorce, it is difficult to reopen the case, especially in equitable distribution states, such as Pennsylvania and New Jersey.

But if the divorce is final and you have recently found out your ex lied to you and to the court, don’t despair. Contact an experienced divorce lawyer. Your lawyer will help you construct as strong a case as possible. You may have to hire a private investigator and/or a forensic accountant. The investigator may use surveillance and online research to uncover evidence of fraud, while the forensic accountant will scrutinize any documentation available, looking into unexpected corners to uncover what’s been hidden.

There can be stiff penalties for hiding property in a divorce case. If you’re thinking of doing it, don’t. But if you suspect your ex undervalued his/her worth, talk to one of our experts to see what we can do to help you.

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The Effects of Divorce on Men and Women

Divorce affects every aspect of a person’s life: economic, physical, emotional, and social. Men and women experience these changes differently, however. If you are divorcing, it’s best to know what to expect so you can develop a strategy that will help you through the process with the least harm to your health and well-being.

Economic

It’s probably no surprise that women tend to fare worse economically after a divorce than men do. Since often women are awarded custody of the children, they make career decisions centered around the care of the children. Women often do not pursue career advancement and may even choose lower-paying jobs with more flexibility so they will be more available for the children. They also have many expenses associated with child-rearing, and although settlements are supposed to consider these factors, they rarely compensate sufficiently, nor do they consider the mother’s decreased earnings potential. Divorce is a major factor in the slip into poverty for many women and children.

Conversely, the husband’s economic position usually improves upon divorce, because he has fewer financial responsibilities and does not have to make career decisions based on child-rearing limitations. However, studies show that this is the only way in which men fare better than women in divorce. In all other areas, women fare better.

Physical

Divorced men have a higher mortality rate than married men or divorced women, and have a greater decline in health than both. Since wives often encourage their husbands to engage in healthy choices of food and activity, divorced men, now without wives to encourage them and with the increased stress of divorce, may fall into bad eating patterns, gain weight, turn to alcohol and drugs, and have increased incidence of heart attacks and stroke.

Emotional

Wives tend to make close relationships outside their home, while husbands usually just socialize with their wives. For this reason, when divorce happens, the wife has friends and family to turn to, while the husband often feels very isolated.

Women are also more likely to seek emotional or psychological support from friends or professional counselors to help them through the grief or anger of divorce. Men, however, are more likely to skip the grieving process and internalize their pain. Men, in general, are less likely to discuss their feelings, and when they do, they usually just talk to their wives. Divorced men no longer have that support. To cope, they may turn to alcohol or drugs.

Divorced men report a lower sense of well-being after divorce and are more likely to have thoughts of suicide than divorced women are.

Social

Because men are lonely and skip the grieving process, they jump into new relationships faster than women do. Women take the time to understand their feelings and often evaluate what went wrong. They don’t rush into new relationships and they make better choices than men do, which often results in staying single. Men remarry more often, but second marriages have an even higher divorce rate than first marriages.

Divorced mothers feel more fulfilled in their motherhood than divorced fathers feel in their fatherhood. Since fathers usually do not get full custody, they miss their children. They miss the sporting events, the school events, even helping with homework. And since they are not as adept at communication as women are, they’re less likely to pick up the phone, talk to the kids, and ask them how their day was. This causes even more drifting apart, which further damages the man’s emotional and physical health.

Limiting the negative effects

If you cannot reconcile your differences and are on the path to divorce, consider closely the possible effects of the divorce on your life, your spouse’s life, and the lives of your children. Try to create a plan together to avoid as much pain as possible. Talk to your divorce attorney. We deal with these situations frequently and may be able to help handle the procedure and settlement in a way that will avoid many of these negative consequences for you and your family.

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Marital vs. Non-Marital Property

When most people think of property, they think only of assets, but debts are also considered property for the purpose of a divorce settlement. In order to divide assets and debts between the spouses, a thorough listing and determination of status is needed. That status can be marital, non-marital, or a combination of the two.

If the couple cannot decide on the division of property, a judge will do so. Pennsylvania and New Jersey are Equitable Distribution states, which means the judge divides the marital property based on what he or she considers fair. The criteria can include earnings of each spouse, length of marriage, health of the spouses, and minor children.

Marital Property – Marital property will be the bulk of your property. A partial list includes:

 

  • Assets acquired or debts incurred during the marriage
  • Gifts from one spouse to the other
  • Benefits from retirement accounts, pension, insurance plans, etc.
  • Benefits from reward programs, such as frequent flyers, etc.
  • Electronic online storage or entertainment (iCloud, iTunes, Netflix, etc.)

A recent blog provides a list of shared accounts to include when listing your assets.

Non-Marital Property – The list of possible non-marital property is short. It includes:

 

  • Assets acquired or debts incurred prior to the marriage
  • Inheritance
  • Gifts received from someone other than the spouse
  • Assets (or liabilities) with a written agreement clearly stating the property is non-marital

When Non-Marital Can Also Be Marital Property

Things are not always as they seem, and just because a spouse had property before marriage doesn’t mean it will remain entirely non-marital property. Here are just a few possible scenarios for each of the types of non-marital property:

 

  • Asset: If one spouse owned the house or a business before marriage, but both spouses worked to pay off the mortgage or grow the business, a portion of the value of the house or business would be considered marital property.
  • Debt: If one spouse incurred student loans before marriage, but the education led to a lucrative job that benefited both spouses, a portion of the debt could be considered marital property.
  • Inheritance or gift: If an inheritance or gift was used to upgrade the family home or purchase property that would generate income for the family, the clear intention was to treat the inheritance as a marital asset.

How to Protect Non-Marital Property

If you want to protect your non-marital property, you can arrange a prenuptial agreement. Such agreements can also be drawn up after marriage, designating specific assets or liabilities that both parties wish to be considered non-marital. These agreements can be challenged if subsequent use of the property suggests marital use, as described above, but the challenging party would have to provide a very strong case to overturn a written agreement.

Division of marital property is best resolved with a professional who is experienced in helping couples come to equitable and amicable agreements. Such an agreement will avoid giving a judge the power to decide for you.

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