Many remarriages with children create a host of new relationships between everyone involved: stepmothers, stepfathers, stepchildren, step-siblings, step-grandparents, etc. Over 4 million children in the United States live in a household with a stepparent. Blended families are increasingly common but come with special challenges that are not present in nuclear families. One of the considerations that is unique to blended families are estate planning issues. When it comes to yours, mine and ours, who gets the assets in a blended family when the parents or stepparents are gone?
What are the inheritance rights of stepchildren? Actually, they have none. If a person dies without a last will and testament, then assets are distributed according to Michigan’s intestate succession laws. If you were to pass away without an estate plan, the state would divide your assets between either your spouse and children, or your closest living relatives. However, for the purposes of intestate succession, the definition of “child” does “not include an individual who is only a stepchild.” MCL 700.1103(f). Stepchildren do not inherit directly from stepparents unless they were legally adopted.
However, the operation of the law is more complicated than that. Due to the nature of blended families, unintended consequences may occur where stepchildren may eventually end up with your assets unless some planning is carried out.
STEPCHILDREN CAN INHERIT YOUR ASSETS FROM YOUR SURVIVING SPOUSE WHEN YOU’RE GONE
In a stepfamily, at least one of the spouses in the marriage is the biological parent of the other spouse’s stepchildren. In the absence of a last will and testament, the surviving spouse is the first person in line to receive assets from your estate. According to MCL 700.2102(1), the intestate share of the surviving spouse is as follows:
- “(a) The entire intestate estate if no descendant or parent of the decedent survives the decedent.”
- “(b) The first $150,000.00 ($242,000.00 in 2021*), plus 1/2 of any balance of the intestate estate, if all of the decedent’s surviving descendants are also descendants of the surviving spouse and there is no other descendant of the surviving spouse who survives the decedent.”
- “(c) The first $150,000.00 ($242,000.00 in 2021*), plus 3/4 of any balance of the intestate estate, if no descendant of the decedent survives the decedent, but a parent of the decedent survives the decedent.”
- “(d) The first $150,000.00 ($242,000.00 in 2021*), plus 1/2 of any balance of the intestate estate, if all of the decedent’s surviving descendants are also descendants of the surviving spouse and the surviving spouse has 1 or more surviving descendants who are not descendants of the decedent.”
- “(e) The first $150,000.00 ($242,000.00 in 2021*), plus 1/2 of any balance of the intestate estate, if 1 or more, but not all, of the decedent’s surviving descendants are not descendants of the surviving spouse.”
- “(f) The first $100,000.00 ($242,000.00 in 2021*), plus 1/2 of any balance of the intestate estate, if none of the decedent’s surviving descendants are descendants of the surviving spouse.”
*This amount may be adjusted by the Michigan Department of Treasury pursuant to MCL 700.2102(2).
Once the surviving spouse inherits your assets, then those assets are later distributed to the surviving spouse’s heirs and devisees after you’re gone. This means that, unless you had children together with your surviving spouse, your assets will like be distributed to your stepchildren and then their descendants.
It might be tempted to merely leave all of your assets to your children in your last will and testament instead of your spouse to avoid this outcome. However, there are statutory measures in place that prevents a spouse from being disinherited. Michigan law provides a mechanism for a spouse to take a portion of the estate even against the terms of the will. Known as the right to elective share, the surviving spouse can make one of the following elections regarding the decedent spouse’s estate to the probate court:
- Abide by the terms of the last will and testament. MCL 700.2202(2)(a).
- Elective Statutory Share: Take ½ of the sum or share that would have passed to the spouse had the testator died intestate, reduced by ½ of the property derived by the spouse from the decedent by any means other than testate or intestate succession upon the decedent’s death. MCL 700.2202(2)(b).
To bypass assets going to your spouse and then your stepchildren instead of biological children under the elective share rules, you may have to consider advanced estate planning techniques to carry out your wishes. For example, you can form a revocable living trust to hold your assets so they avoid the probate process after you pass away. The trust can allow your spouse to use and benefit from your trust assets during the remainder of his or her lifetime, then they would be distributed to your children. Assets in a revocable trust would not be subject to the spouse’s right to elective share. Other methods to prevent assets from going through probate include jointly titling your children to specific assets such as real estate and bank accounts. When a joint owner passes away, the asset is solely titled to the surviving owners automatically and is not subject to probate proceedings or spousal elections.
STEPCHILDREN MAY AUTOMATICALLY BE REMOVED FROM YOUR WILL OR TRUST AFTER DIVORCE
When divorces occur in blended families, relationships become even more complicated. Stepparents may form a bond with stepchildren, but the legal relationship is swept away after the stepparent is divorced from the biological parent. Even when a stepchild is provided for in the stepparent’s last will and testament or revocable trust, the operation of law may cause that stepchild to be removed as a beneficiary.
“Except as provided by the express terms of a governing instrument, court order, or contract relating to the division of the marital estate made between the divorced individuals before or after the marriage, divorce, or annulment, the divorce or annulment of a marriage” revokes ALL of the following that are revocable:
- “A disposition or appointment of property made by a divorced individual to his or her former spouse in a governing instrument and a disposition or appointment created by law or in a governing instrument to a relative of the divorced individual’s former spouse.” MCL 700.2807(1)(a)(i).
- “A provision in a governing instrument conferring a general or nongeneral power of appointment on the divorced individual’s former spouse or on a relative of the divorced individual’s former spouse.” MCL 700.2807(1)(a)(ii).
- “A nomination in a governing instrument, nominating a divorced individual’s former spouse or a relative of the divorced individual’s former spouse to serve in a fiduciary or representative capacity, including, but not limited to, a personal representative, executor, funeral representative, trustee, conservator, agent, or guardian.” MCL 700.2807(1)(a)(iii).
in Joseph & Sally Grablick Trust, ___ Mich App ___; ___ NW2d ___ (2021)(Docket No. 353951), the Michigan Court of Appeals held that the biological daughter of decedent’s ex-wife (but not decedent) was not a beneficiary of the decedent’s will or the family trust because the dispositions to her were revoked under MCL 700.2807(1)(a)(i) when the decedent and his wife divorced. The stepdaughter (“appellant”) was eight years old at the time her mother and the decedent married in October 1993 and was treated by the decedent like his own daughter both during and after the marriage. The decedent executed his will on September 28, 2005 that identified his spouse and identified if his living children as the appellant who is his “step-child”. Also, on September 28, 2005, the decedent and his spouse executed a joint revocable trust that stated the grantors were married to each other and the appellant was their only living child. Under the terms of the trust, upon the death of either spouse, the surviving spouse was entitled to receive all principal and income, and upon the death of the surviving spouse, appellant would receive all principal and income. In the event the appellant did not survive them, the principal and income would be distributed by default to identified relatives of the decedent and identified relatives of his wife (50% to each).
However, the decedent and his wife divorced on April 3, 2019. The decedent then died on July 2, 2019. The appellant was appointed personal representative of the decedent’s estate and filed a petition for probate and a petition in the trust case requesting an order determining heirs. The appellees, who were two blood relatives of the decedent that would receive the principal and income of the estate/trust if the appellant did not, filed a petition asking the court to exclude appellant as a beneficiary due to the statutory provision of MCL 700.2807(1)(a)(i). The probate court found, after appellees’ motion for summary disposition, that the appellant was not a beneficiary of the decedent’s will or the trust because the dispositions to her were revoked under MCL 700.2807(1)(a)(i) when the decedent and his wife divorced.
The Michigan Court of Appeals agreed, finding that the operation of divorce not only terminates any possible inheritance rights of the former spouse but also those of the relatives of the former spouse that are not also related to the decedent. Thus, even if the decedent had treated and wished for a stepchild to be treated in the same way as a biological child no matter what, the stepchild may still lose the right to inherit due to his parent’s divorce. If a testator still wishes to provide for former stepchildren, the terms of the will or trust must expressly indicate that these individuals would inherit despite their parents’ divorce.
PROPER ESTATE PLANNING CAN HELP PREVENT UNINTENDED CONSEQUENCES FOR STEPFAMILIES
If you want your stepchildren to inherit from you directly, you must specifically name them as beneficiaries using at least one estate planning tool, such as a will, trust, or beneficiary designation. Likewise, any estate planning already done should be carefully reviewed after a divorce to ensure the new reality is consistent with your plans for distribution. It is recommended that these documents are prepared with the assistance of a skilled probate lawyer to ensure all of your wishes are carried out. Blended families need to pay special attention during estate planning to avoid unexpected results, so obtaining the advice of sound legal counsel is critical.
If you or a loved one have any further questions or need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC for assistance today.