Ex-tended Family Tree Inheritance


Like many people these days, mine is an ex-tended family, with the hyphen, meaning that it includes exes.  I know ex-tended families where the exes get along so well that at reunions there’s several sets of exes with their new spouses plus their exes, and all their kids, etc. all making up a considerable mob that rivals what our ancestors in the age before divorce were able to assemble by unrestrained serial procreation.  My ex-tended clan isn’t all that big or all that chummy, but it has some of the same legal issues that face all “blended” families where there’s two sets of kids from different ex-spouses.  Over the holidays I spent some time boning up on the problem.

In a community property state like California, what tends to happen in a second or later marriage is that one spouse dies, leaving all assets to the other current spouse.  The kids of the first spouse from a previous marriage then have to rely on the good will and forethought of the second spouse to provide for them when the second spouse dies.  Often enough, the kids of the first spouse get left out in the cold, leading to bad feelings and lawsuits.

There’s a tried and tested solution to this problem.  It’s called the “A-B Living Trust.”  Both spouses while alive transfer their property into this trust.  When the first spouse dies, the community property (such as the house) gets transferred into a Bypass Trust.  The surviving spouse benefits from, but doesn’t own, the assets in the Bypass Trust.  When the second spouse dies, the assets in the Bypass Trust get divided between the two sets of kids, so that each set of kids gets their share and everybody’s as happy as they can be under the circumstances.

Like every Living Trust, this specialized kind of trust bypasses probate and, for modest estates, avoids estate taxes.  You can get AB Trust document templates from Nolo Press and perhaps from a lawyer friend.  The one from my lawyer friend was so arcane and filled with legalese that even I had trouble reading it.  The one from Nolo was better but still written for a lawyer’s eye; my focus group of testers (OK, my wife) gave it a thumbs down for legibility.  Attached, after many drafts, is my effort to produce a version that both people who will sign it can understand without having a law degree from Boalt Hall.  Click here for the PDF.

But before you rush in, read the notes at the end, with the cautions.  This is serious business.  The template may not fit your situation, and you may still have to consult a lawyer.  Nevertheless, sometimes just knowing that there’s a solution, and having a general idea of what it looks like, can be a big help.  Achieving distributive justice in any family is difficult.  Ex-tended families pose a whole new level of challenges. It’s good to know that the law, which created some of these problems by permittiing civil divorces, also provides tools to solve some of them.

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