Common Pitfalls in Estate Planning for Blended Families[1]

The traditional concept of the nuclear family (i.e., mother, father and one or more children of a single relationship) has evolved over the years. The modern family is more complicated and may consist of parents who are in second or third relationships and who bring into a relationship  children from one or more prior relationships.  To further complicate the familial structure, there may also be children of the current relationship.

Stepfamilies are more frequent and more diverse than ever before.[2]   In 2016, 1 in 10 children were part of a stepfamily.[3]   6.1% of children were living with one of their biological or adoptive parents and a step-parent by marriage or common-law union.[4]   Slightly more than half of them had no half-siblings or step-siblings (i.e., any brothers and sisters were the children of the same parent: a simple stepfamily).[5]   Slightly less than half were living in a more complex situation: they had at least one half-sibling or step-sibling.[6]   37.2% of children in stepfamilies had both of their biological or adoptive parents present, and had at least one half-sibling.[7]

While many of the issues which impact blended families are similar to those of traditional nuclear families, there are others that are unique to blended families and which have the potential to create discord and mistrust among the members of the family if not handled properly. Often, there is the necessity to consider the needs of a surviving spouse and perhaps competing needs of children who are not the children of the relationship but are from a prior relationship.

Unfortunately, if proper planning is not undertaken, what often occurs in the blended family context is that one branch of the family receives the entire estate, and the other branch of the family receives nothing. These are a few common scenarios:

• Assume two spouses are in a second marriage and each have children from a prior marriage. The spouses each leave their entire estate outright to each other upon their death and to all of their respective children upon the second to pass, equally. Upon the first spouse’s passing, the entire estate is left to the surviving spouse. Then, the surviving spouse remarries…again. In Ontario, marriage revokes a will, unless the will is made in contemplation of the marriage. As a result, even though the surviving spouse’s will provided for both sets of children equally as the beneficiaries of the estate, the consequence of the remarriage rendered the will invalid. If the surviving spouse fails to sign a new will after the remarriage, he or she will effectively die intestate. This means that all of the assets of the surviving spouse will go to his or her new spouse and his or her children only, since the intestate succession legislation does not include step-children.
• Similarly, assume two spouses are in a second marriage and each have children from a prior marriage.   The spouses each leave their entire estate outright to each other upon their death and to all of their respective children upon the second to pass, equally. Each spouse tells the other that he or she trusts the other completely. Each spouse has a positive relationship with the other’s children. Following the death of the first spouse, the surviving spouse becomes estranged from the children of the first spouse to pass and decides to re-write his or her will, leaving everything to his or her own children only and nothing to the children of the first spouse to pass.
• Lastly, assume two spouses are in a second marriage and each have children from a prior marriage. The spouses each leave their entire estate outright to each other upon their death and to all of their respective children upon the second to pass, equally. One spouse passes away and thereafter, the surviving spouse decides to engage in probate tax planning. For example, the surviving spouse adds his or her children as joint owners with right of survivorship to his or her bank accounts and real property, and designates his or her children as beneficiaries of his or her registered plans. Although the children of the first spouse to pass remain equal beneficiaries of the surviving spouse’s will, the will provisions may effectively be circumvented if he or she has removed all (or most) of his or her assets from his or her estate.

In all of these examples, the children of the first spouse to pass may have no recourse at all (a dependent’s relief claim may be unavailable). This is often an unintended consequence that occurs in a second or third marriage with children from one or more prior relationships.

On the other hand, there may also be negative consequences of spouses in second or third marriages leaving their entire estate to their children from a prior relationship. Regardless of the terms of one’s will, a surviving spouse may have a claim against the estate of the first spouse to pass if he or she has not been adequately provided for.[8]   In certain cases, the surviving spouse may also have the option to elect under the Family Law Act to receive his or her equalization of net family property if he or she is not satisfied with what he or she is entitled to under the will.[9]

As a result, it is important for estate planners to offer alternatives to their clients in blended families that take into account the competing interests of all the parties involved. Stay tuned for my next blog post on strategies to help do so!

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[1] This blog was adapted from the following paper, which was presented at the Ontario Bar Association Professional Development: Estate Planning for Blended Families:  Hoffstein, Maria Elena and Sud, Brittany, “Effectively Using Trusts, Mirror Wills and Mutual Wills”, October 29, 2018.

[2] Statistics Canada, based on 2016 Census Data, Portrait of children’s family life in Canada in 2016.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8]   Succession Law Reform Act, RSO 1990, c S 26 at section 58(1): “Where a deceased, whether testate or intestate, has not made adequate provision for the proper support of his dependants or any of them, the court, on application, may order that such provision as it considers adequate be made out of the estate of the deceased for the proper support of the dependants or any of them.”

[9] Family Law Act, RSO 1990, c F 3.