Divorces and Protecting Delayed Transfers to Step Children

Wednesday, January 8, 2020

    It is not uncommon in a divorce for a couple to agree to a settlement where one former spouse gets the lifetime use of a certain home or investment property, with the understanding that the other former spouse’s children will ultimately receive the real estate.  

    Some people try to accomplish this with a Contract to Make a Will.  

    A Contract to Make a Will is often an invitation to litigation after the step parent dies, however, if the step parent’s Will does not benefit the step children in the way that was set out in the Contract to Make a Will.

    Further, the intended step children beneficiaries may not even know their step parent has died, or may only learn of the step parent’s death after the probate is completed and the assets have been distributed.

    In addition, the step parent, despite promises to the contrary, might sell or otherwise dispose of the property during their lives.

    Even when the step parent does not intentionally cheat the intended beneficiaries, the step parent could lose the property if they have an under insured accident, or if they get sick, or if they need long term care.

    A solution to this may be to instead have the step parent receive something similar to a life estate, but less than a full life estate, with the remainder going immediately to the step children, who will get the property when the step parent dies or otherwise no longer qualifies for possession of the property, but with the step parent essentially controlling the property (and any income from the property) during most of their lifetime.

    Often this can best be achieved with a trust.

    For more information on this, see the article on How To Protect A Delayed Gift of Real Estate elsewhere in this series of articles.