Stepmothers are frequent characters in California trust and estate litigation, as they are in fairy tales and Disney movies. With about half of all marriages ending in divorce, there are many stepmother/stepchild relationships. Mostly they work out fine, but some go south.
After blogging on sibling conflicts as a driver of trust and estate disputes, I offer thoughts today about the litigation I see between stepmothers and stepchildren. In Family Feud parlance, my personal survey says that step-parent relationships are a close second to sibling relationships as the setting of trust and estate litigation. I’ll focus on stepmothers here, though of course stepfathers also often clash with their stepchildren.
Conflicts If Dad Becomes Mentally Incapacitated
With about a third of Americans age 85 and up suffering from Alzheimer’s disease, not to mention other ailments, many of us will become mentally incapacitated before we die.
In most marital estate plans, spouses name each other as agent under financial power of attorney, agent under advance health care directive, and successor trustee. This will leave stepmother in control over Dad’s care and finances if he cannot make his own decisions.
Should Dad remain at home with caregivers or move to a facility that provides “memory care” for elders with dementia? There are many tough decisions to make when elders become mentally or physically infirm.
If Dad signed estate planning documents vesting control in stepmother, children who cannot work cooperatively with her will have few options other than filing a conservatorship petition in the Superior Court of California. A probate judge, after a noticed hearing, can impose a conservatorship over Dad’s person and/or estate, and enter orders terminating any powers given to stepmother. However, before upsetting Dad’s estate planning, the judge will look for compelling evidence that stepmother has not acted and will not act in Dad’s best interests.
“Parent custody” disputes, the term I use for contested conservatorships, appear to be on the rise in California. While they more commonly pit sibling against sibling, they may also feature one or more children against stepmother.
Conflicts with Stepmothers After Dad’s Death
When couples create trusts, they typically include provisions to provide for the surviving spouse. Hence, for example, a stepmother often becomes the sole trustee upon her husband’s death and thus takes control over his share of the assets.
Trusts often call for the allocation of property upon husband’s death, with his separate property and half of the community property passing to one or more subtrusts for the lifetime benefit of stepmother. She usually gets all income generated from the subtrusts and also a discretionary right to draw on (aka “invade”) the principal as needed for health, education, maintenance and support.
If stepmother wants to take a $100,000 cruise around the world, can she invade the trust principal on the theory that she took nice vacations with her late husband and thus the lavish trip is warranted for her “maintenance and support?” Since there are no bright line rules, stepmothers and stepchildren may disagree about such expenses.
Much of late husband’s wealth may consist of real estate, business interests, and other illiquid assets, the long-term management of which often sparks controversy.
Let’s say that husband owned a beach house that he enjoyed with children from his first wife. When he dies, stepmother becomes trustee of the subtrust that holds the beach house. What if she wants to use trust funds to pay for a major remodel and does not allow her stepsons to use the house? What if she only occasionally uses the house and declines to rent it out? The stepsons will have emotional attachment to the beach house and good cause for concern that expenditures associated with the house will erode the assets they may someday inherit.
If stepmother is relatively young, and/or not much older than her stepchildren, the friction can be magnified as the stepchildren wonder if they, or their children, will ever be able to enjoy any of the assets. Of course, there is no birthright to inherit, and husband has every right to favor stepmother over his children in his estate plan, but the children may view stepmother as Lady Tremaine and sue her.
Suggestions to Dads on Dispute Avoidance
While I am a litigator, not an estate planner, I offer a few suggestions to fathers who are concerned about possible conflicts between their second (or third, etc.) spouses and their children from a prior marriage:
Find a skilled estate planning attorney who can help you create or update your estate plan to accomplish your objectives.
Take time to explain your family dynamics to your estate planner and explore options to minimize conflict.
Consider naming a professional fiduciary or bank trust department to become successor trustee, instead of your spouse. Outside professionals are well situated to ensure that trusts are administered correctly and neutrally.
Explain your estate plan to your children so they are not surprised by its terms.
Consider making a gift to your children at the time of your death rather than deferring all of their inheritance until your spouse passes.
Periodically review the estate plan with your attorney to ensure that it meets your needs and is suitable in the current tax environment.
Suggestions to Stepmother After Husband Passes
Consult with an estate planning attorney soon after your husband passes. You can, but need not, work with the attorney who prepared the trust.
As successor trustee, you have fiduciary duties of loyalty and care to all beneficiaries, as detailed in the trust instrument, the California Probate Code, and California case law. Your many powers as trustee are subject to your duties – your lawyer can help you navigate these shoals.
If in doubt, it is better to obtain legal advice before you take an action that may upset other beneficiaries, including your stepchildren.
Keep careful records of your transactions with trust assets and discuss your accounting and tax reporting obligations with your attorney and tax preparer.
Stay positive: judges generally will enforce language in the trust document that provides for surviving spouses even if stepchildren are unhappy about the situation.
Suggestions to Stepchildren After Dad Passes
Under California Probate Code section 16061.7, stepchildren may receive a notice of trust administration after Dad passes, telling them that they must file any lawsuit to contest the trust within 120 days. If not provided along with the notice, stepchildren should request copies of the original or restated trust instrument and any amendments.
Trust instruments may be ambiguous and complex, and the Probate Code may override some provisions.
The attorney representing stepmother as successor trustee is not your lawyer. If you have any concerns, you should consult with your own attorney. Most lawyers do not deal with trust administration, so find one with pertinent experience.
Monitoring trust administration over the years should help ensure that the trust is properly administered so that your remainder interests are protected. At the same time, an overly aggressive approach may backfire especially to the extent stepmother has discretion as to trust assets. You may catch more flies with honey than with vinegar.