Estate planning for blended families

Dear Len & Rosie,

Two very dear friends of ours have lived together, unmarried, for over twenty years. He owns the house. Both were married before and have grown children and grandchildren. Each of them are financially well-off, and they have bank accounts, investments and other assets.

When we mentioned that we had a trust, they said they did not have a trust, or even wills, and they want nothing to do with them. I would appreciate any information you could provide about community property and the possible consequences of their decision not to plan for the eventual disposition of their assets.

Alfred

Dear Alfred,

Your friends are shortsighted. The absence of an estate plan adds to a family’s trauma when they loose a loved one. They are not saving money by leaving things to chance.

We assume that your friends want their property to wind up in the hands of their respective children after both of them pass away. Having no estate plan at all is not the best way to make that happen. When one of your friends dies, any assets they own together in joint tenancy will go to the surviving partner. When the surviving partner dies, those assets will to his or her children by intestate succession, leaving other family with nothing.

On the other hand, the surviving partner will have no rights to the assets of the deceased partner, other than those held in joint tenancy. To own community property, a couple must either be married or registered as domestic partners with the California Secretary of State. There’s no common law marriage in California, no matter who long they have lived together. Any assets owned by the deceased partner, titled solely in his or her own name, belong to the dead partner’s probate estate and will pass to the his or her children unless there’s a will that says otherwise. In your friends’ case, if he dies first, she won’t have any right to the home and may be forced to move out. Where is she going to live?

Your friends can avoid these problems by creating wills or a trust that clearly spells out how they each want to dispose of their jointly acquired assets, as well as their separate assets. After one partner dies, a portion of the dead partner’s assets can be held in trust for the benefit of the survivor. For instance, he may want to preserve her right to live in her home of twenty years. He could do so simply by leaving her a life estate in the home in his will, or by creating a trust that holds the home for her benefit. When she dies, the home could then pass to his children, instead of going to her children.

Unless they truly do not care what happens to their property, each other, and their families, your friends really need to pull their heads out of the sand and create an estate plan to distribute their assets they way they want, instead of leaving it all to luck.

Len & Rosie