Divorce and blended family nightmares after you die

Rhonda Griswold, a Cades Schutte law firm partner, joins producer/host Coralie Chun Matayoshi to discuss how you can pass assets down to children from a prior marriage while still providing for your new spouse, whether your stepchildren can inherit from you, how to protect your family home from going to someone outside your family, and how you can protect your children’s inherited assets from creditors’ claims or in a divorce.

Q. Even though Hawaii has the lowest divorce rate in the country, we still have a lot of divorces, remarriages, and blended families here. If you have children from a prior marriage , how can you take care of them if you remarry?

In blended families, it is pretty standard for each spouse to leave assets in trust for the surviving spouse, instead of outright, to make sure that whatever assets are left at the survivor’s death, will pass to the decedent’s own children. That said, if you have children from a prior marriage but want to take care of your surviving spouse, then it is helpful to leave an outright gift to your children at your death, with the balance in trust for your surviving spouse.  A lot of people just leave everything to their surviving spouse either outright or in trust, but then the kids must wait for stepparent to die before they get anything.  It is much easier on the relationship if the kids get something up-front.  If you are concerned about your own children’s possible divorces, then you can also consider leaving their inheritance in “generation-skipping” or “dynasty” trusts for them instead of giving the assets to them outright.  The child and grandchildren are the beneficiaries of such trusts, and the child can be the trustee, but such a trust provides some protection if a child were to divorce or be sued by a creditor.

Q. What if you remarry and your new spouse already has children? Can your stepchildren inherit from you?

If you have a Will or Trust, you can name whomever you want as a beneficiary, including your stepchildren. If you do not have a Will or Trust, then under Hawaii’s updated Probate Code, stepchildren are now heirs-at-law if all biological relatives are deceased.

Q. What I give birth to a child through assisted reproductive technology (e.g. IVF) – is my child entitled to inherit from my spouse?

The law has changed so that the definition of parent-child relationship now includes children born via assisted reproductive technology (so the child may not be the biological child and is not adopted by the non-genetic parent, but still considered the child of both parents).

Q. How can you protect your family home from going to someone else? For example, you and your spouse own your house jointly (tenants by the entirety) with 100% going to the surviving spouse. What if your surviving spouse remarries?

If you are concerned about a spouse’s remarriage, then you should own your tenants by the entirety property in either separate or joint revocable trusts. The property will retain its trust and estates protection, but your 50% interest cannot be given to a new spouse after your death.

Q. What if you have a larger estate and assets that you want to keep in the family?

You should have a premarital agreement with your spouse to protect in case of divorce or death, and make sure your children have pre-marital agreements to protect expected inherited assets in case of divorce. Generation-skipping trusts are also a good way to protect your children’s inherited assets from creditors’ claims or in a divorce. Such trusts can also include provisions to try to discourage “trust baby” behavior (e.g. beneficiary must be productive, gainfully occupied, and not have substance abuse issues). But you can also give the child flexibility to tweak trust terms for the next generation.

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Disclaimer: this material is intended for informational purposes only and does not constitute legal advice. The law varies by jurisdiction and is constantly changing. For legal advice, you should consult a lawyer that can apply the appropriate law to the facts in your case.