Will dad be displaced by stepkids?

Dear Len & Rosie,

My 74-year-old stepmother has been diagnosed with terminal kidney cancer and is expected to die within two years. Her will provides that her home and other assets be sold and distributed 50-50, half to her kids and half to my father. Is this legal and enforceable? I'm afraid that my father will be displaced and lose his home and his independence when she dies.

Maria

Dear Maria,

Your stepmother has the right to leave her assets to anyone she wants upon her death. She is under no legal obligation to leave anything to your father at all.

Many people in second marriages want to make sure that their children from prior marriages do not lose their inheritance. Over the years, we’ve heard many widows say that their late husband’s children never respected them, or the stepchildren were being greedy, or a stepchild was asking too many questions about the will or trust.

If your stepmother dies first and your father inherits everything, then he could very well disinherit her children. This is probably what she was thinking when she made her will.

But it may not work out the way she wants. When your stepmother dies, her will shall apply only to her probate estate, which consists of assets titled in her name alone, in tenancy in common with others, or in community property (but not community property with right of survivorship) with your father.

If the home is titled in joint tenancy with your father, he’ll own it and any other joint tenancy assets outright upon his wife’s death, no matter what her will says. He’ll also inherit everything left to him by beneficiary designation.

But that’s leaving it all to chance. A joint tenancy can be severed (converted into a tenancy in common) anytime before the death of either joint tenant.

Your step-mother can do this by herself without the consent of your father, as long as the deed is recorded before her death. Or, if she signs the deed severing the joint tenancy within three days before her death, her children can record it within seven days after her death.

The best way of dealing with this problem is for your father and his wife to communicate with one another about what each of them want.

They should also meet with an estate planning attorney to review their existing estate plans. There are many possible solutions that will allow the surviving spouse to stay in the family home and receive the benefit of both spouses’ assets while protecting the inheritance rights of the deceased spouse’s children.

For example, your stepmother can give your father a life estate in her half of the home and pass the remainder interest on to her children. Or she could have her half of the home held in a trust for your father’s benefit.

The two of them together could even enter into a written contract promising to leave everything to one another on the first death and then to both families equally on the second death.

Don’t forget that your stepmother is ultimately in control of her own assets.

She does not have to create a trust with your father, and may still want to leave everything to her children upon her death.

Brush up on your sales skills and try to persuade her that allowing your father to live in the home until his death is a good thing for her to do, and that she can do this while still protecting her own children’s inheritance.

Len & Rosie

Can I make my own trust?

Dear Len & Rosie,

Can I make my own trust? I have tried to look up the requirements of filing a trust in California, but I have been unable to find any. I have consulted many publications at the local community college but I have been likewise unsuccessful. Do you know of any publications or forms that I can get to make my own trust?

Sam

Dear Sam,

A will isn’t that hard to create for yourself. You can make a valid holographic will that distributes your estate, as long as you write it out in your own handwriting, and sign and date it. You do not need a witness. If you type out your will, your signature must be witnessed by two adults who will not receive anything from your estate.

People making their own wills may be better off making a California Statutory Form Will. Just search for it on the Internet. You can also download it for free from the State Bar web page at www.calbar.ca.gov under the link for “Will Form”. Or, email len@lentillem.com and we’ll send you the form. Just follow the directions closely. The law does not readily forgive drafting errors.

Trusts are much more complex than wills. Most people do not understand trusts, and their subtleties take a long time to learn. For instance, in your letter, you talked of “filing” a trust. Trusts do not have to be filed or recorded. They are not meant to be public documents.

If you were to make your own trust, you could easily make fundamental mistakes which can render your estate plan unworkable after your death. You should take into account the age of your beneficiaries and their relationships with one another; the size of your estate and the eventual source of money to pay any estate taxes and debts that might be due when you die; disabilities of your children or other beneficiaries; what to do with retirement accounts, survivor’s pensions and deferred annuities; who is trustworthy enough to be successor trustee after your death; and many more issues.

If you still want to make your own trust, there are many books, computer programs, and webpages where you can create an inexpensive trust without a lawyer. Please understand that there is no particular product that we will endorse. We have reviewed many self-made trusts over the years. Most of them omit what we believe to be necessary provisions. If you create your own trust, you should, at the very least, have it reviewed by an attorney.

Finally, do not forget to transfer your assets into your trust so that they will avoid probate on your death. As a rule of thumb, everything should be in the trust except for automobiles, tax deferred accounts such as retirement accounts, annuities and deferred compensation, and it’s always better to keep your checking account out of the trust and add a trusted child to the account so he or she would have immediate access to some funds in the event of an emergency.

Len & Rosie