skubikky
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Post by skubikky on Nov 5, 2014 16:15:36 GMT -5
What if you both die at the same time? Or if it can't be determined who died first? You need to designate the beneficiaries under that circumstance and a guardian for DD and trustee of her portion as well.
It would be best to have DH designate the beneficiaries on his 401(k) to be 25% Step-child1, 25% Step-child 2, 25% DD and 25% moneymom. It's distribution does occur outside of the probate process. As would any accounts that have a POD(pay on death) or beneficiary designation. Same for the proceeds from a life insurance policy.
Things like your home and any assets that can't be directly assigned to a beneficiary can go in the trust.
I admire and appreciate your levelheadedness. Your instincts appear to be sound and well intentioned. Counsel with your attorney on how best to include the step-children as well as you and DD.
Once it is done and DH just has to read and sign the docs, it will take the pressure off of him and I suspect he'll just agree and get it done. You sound like a good wife and mother. It is a good and right thing to include his children. Think of it from their point of view. Even though it's been a rough ride. It's the right thing to do.
I'm guessing that it will all work out and you'll feel much better once all the papers are drawn and signed.
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gooddecisions
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Post by gooddecisions on Nov 5, 2014 16:17:11 GMT -5
My understanding is that you never want the benificiary of your 401K to be the trust or estate. That's weird because my lawyer absolutely said it was best to change the beneficiary of our 401(k)s and IRAs to "my estate" so that it will come into our executor’s hands and passed under the Will. The will should spell out who gets what.
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HoneyBBQ
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Post by HoneyBBQ on Nov 5, 2014 16:17:54 GMT -5
What is you both die at the same time. Or if it can't be determined who died first? You need to designate the beneficiaries under that circumstance and a guardian for DD and trustee of her portion as well. Great point. Our wills have the if-then clause. If I die, X. If he dies, Y. If we both die and DD survives, then Z. If we're all toast, then Q. If we both die, For us, we still have that same money going to the step kids and all the rest of our combined assets and estate going to the guardian of DD.
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kittensaver
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Post by kittensaver on Nov 5, 2014 16:22:53 GMT -5
Why not? If our financial life is set-up through a Trust, why have a major asset outside of it? It has to do with the way it will be taxed. It's been awhile since it was explained to me though. For example she could roll it over into a spousal IRA and not take any distributions until she is of retirement age. Understood! But the way (at least in CA, I don't know about other states) Family Trusts are constructed/set up, all assets belong to the Trust and are administered by the Trustees (moneymom and DH) for the benefit of the beneficiaries (should also be moneymom and DH). If one of the trustees and/or beneficiaries passes on, the Trust continues "as-is" - as long as the surviving spouse is both Trustee and Beneficiary nothing will change (except the physical loss of the spouse and dodging/avoiding Probate). The surviving spouse will continue to manage the assets as they see fit. Because the Trust is active, a cash-out will not be forced (due to loss of spouse) triggering a taxable event, and moneymom will be free (within the limitations of law, of course) to manage the 401(k) as she sees fit (as Trustee) until she chooses to change it and/or draw on it or cash it out.
I believe moneymom's concern right now is what to do about one or more Successor Beneficiaries. OF COURSE she wants things settled and OF COURSE her attorney will press her to put a succession plan in place; I was only giving her the option of narrowing her focus RIGHT NOW in order to get this task completed. They can always amend the Trust later to name future beneficiaries. DH and I have amended our Trust twice already, and will probably do so again in the future. Things change with time.
And if moneymom and DH never end up agreeing and their Trust is "silent" about successors, after both of them are gone the Trust will be dissolved and assets will simply be distributed according to existing inheritance laws in CA.
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moneymom
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Post by moneymom on Nov 5, 2014 16:28:17 GMT -5
What if you both die at the same time? Or if it can't be determined who died first? You need to designate the beneficiaries under that circumstance and a guardian for DD and trustee of her portion as well. It would be best to have DH designate the beneficiaries on his 401(k) to be 25% Step-child1, 25% Step-child 2, 25% DD and 25% moneymom. It's distribution does occur outside of the probate process. As would any accounts that have a POD(pay on death) or beneficiary designation. Same for the proceeds from a life insurance policy. Things like your home and any assets that can't be directly assigned to a beneficiary can go in the trust. I admire and appreciate your levelheadedness. Your instincts appear to be sound and well intentioned. Counsel with your attorney on how best to include the step-children as well as you and DD. Once it is done and DH just has to read and sign the docs, it will take the pressure off of him and I suspect he'll just agree and get it done. You sound like a good wife and mother. It is a good and right thing to include his children. Think of it from their point of view. Even though it's been a rough ride. It's the right thing to do. I'm guessing that it will all work out and you'll feel much better once all the papers are drawn and signed. Thank you for this. I feel a lot better about it. I realize it's time to stop thinking and start acting.
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HoneyBBQ
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Post by HoneyBBQ on Nov 5, 2014 16:30:05 GMT -5
not yet. We haven't got there yet. Right now he has it as 25% to me, DD, SS, SD. EDIT: I set it up that way. He wouldn't even do that. EVERYTHING should be coming to The Trust. The surviving spouse should be the successor trustee AND beneficiary. That's as far as you need to get RIGHT NOW. Especially to break an impasse. You can make other decisions later as needed.
I disagree. Her step kids may feel slighted and like "it's not what dad would have wanted" and sue her. Better to explicitly give the s-kids something now so they know they were thought of and it was what her H wanted. JMO. MM seems to have a similar family set-up as me. One of the S-kids hates us and won't talk to us because we don't give her enough money. So, leaving everything to MM will start a war that she will emotionally be embroiled in. Better to take the guesswork out. Leave the money explicitly and get on with raising her young child.
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kittensaver
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Post by kittensaver on Nov 5, 2014 16:36:13 GMT -5
EVERYTHING should be coming to The Trust. The surviving spouse should be the successor trustee AND beneficiary. That's as far as you need to get RIGHT NOW. Especially to break an impasse. You can make other decisions later as needed.
I disagree. Her step kids may feel slighted and like "it's not what dad would have wanted" and sue her. Better to explicitly give the s-kids something now so they know they were thought of and it was what her H wanted. JMO. OF COURSE every family (and their dynamics) are different and everyone will do what they need/want under the circumstances, but as a community property state, everything joint DOES belong solely to her (even if his kids HATE the idea of it). She has the absolute right to assert her claim to it (and the kids don't).
Because DH was refusing to take any next steps, I was simply giving her an option - - to narrow her focus down to something he could agree with and understand TODAY. Once she is protected, she and/or they can continue to hash out the details and dynamics (rather than decide nothing and leave her future security at-risk). If he "goes" first and she chooses to be generous to his kids and give them something, I say good for her (in this sometimes nasty world where people toss each other away for the sake of money).
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sesfw
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Post by sesfw on Nov 5, 2014 16:41:08 GMT -5
I don't want them to be waiting on my death to get something.
I would suggest an inexpensive life insurance for DH with the step kids beneficiaries ($25K - $50K?). They will get the lump sum tax free at his death and not have to wait for you to leave. This will be outside of the family trust and anything to do with you and DDs estate from DH.
Then make a standard family trust for you, DH, and DD.
I'm a KISS type person ......... Keep It Sweet and Simple
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Deleted
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Post by Deleted on Nov 5, 2014 16:44:20 GMT -5
I don't understand why everyone keeps telling her to have her DH get more life insurance for the kids instead of just splitting an asset he already owns. I agree with the 25% of the 401K to each person. maybe when your DD gets older, split the 401k 3 ways and you just have the life insurance.
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HoneyBBQ
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Post by HoneyBBQ on Nov 5, 2014 17:09:08 GMT -5
He already has life insurance according to the OP.
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lynnerself
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Post by lynnerself on Nov 5, 2014 17:31:59 GMT -5
I don't understand why everyone keeps telling her to have her DH get more life insurance for the kids instead of just splitting an asset he already owns. I agree with the 25% of the 401K to each person. maybe when your DD gets older, split the 401k 3 ways and you just have the life insurance. I agree with this. However she will have to get her DH on board because only he can change the beneficiary.
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Artemis Windsong
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Post by Artemis Windsong on Nov 5, 2014 17:56:57 GMT -5
I would suggest a different kind of percentage split. 100% to moneymom.
Or designate a dollar amount to the Skids that are estranged.
--------------- From experience, a trust has to have a beneficiary.
Make sure your personal representative know what's involved in distributing the assets. A bank trust department is a very logical but expensive choice when the family is bickering, or will be at each others throats.
Grief does that.
I am going through a nightmare because my brother, the only trustee, will not release property. By the time this horses az is done, the lawyers will have eaten any and all assets up in fees.
I am seriously considering redoing my will. The family wants to avoid me, so be it. No inheritance.
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vonna
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Post by vonna on Nov 5, 2014 18:05:46 GMT -5
moneymom,
I think it is great that you want to address this, and make sure your S-kids are treated fairly.
But, if I understand correctly, you are a SAHM and your survivor plan works only if you start working. I really think that number one is YOU. You are raising your DD, and if something were to happen to your DH, do you need the stress of having to find a job to make ends meet for you and your DD?
Maybe a different division of the 401K would make sense -- say, 50% (or more) for you, and the remaining 50% split three ways between your husbands three children?
It seems the most important thing is that he treats all three children equally. BUT -- You are his spouse! It may make sense that your portion of the 401K is higher. Years from now, you can always readdress this and possible increase the amount that goes to the kids. But I think you should make sure that you are okay first, then make sure the remaining portion of your DH inheritance is equally divided amongst his three kids.
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Deleted
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Post by Deleted on Nov 5, 2014 18:12:56 GMT -5
moneymom,
I think it is great that you want to address this, and make sure your S-kids are treated fairly.
But, if I understand correctly, you are a SAHM and your survivor plan works only if you start working. I really think that number one is YOU. You are raising your DD, and if something were to happen to your DH, do you need the stress of having to find a job to make ends meet for you and your DD?
Maybe a different division of the 401K would make sense -- say, 50% (or more) for you, and the remaining 50% split three ways between your husbands three children?
It seems the most important thing is that he treats all three children equally. BUT -- You are his spouse! It may make sense that your portion of the 401K is higher. Years from now, you can always readdress this and possible increase the amount that goes to the kids. But I think you should make sure that you are okay first, then make sure the remaining portion of your DH inheritance is equally divided amongst his three kids.
there is a million dollar life insurance policy that she is the sole beneficiary of. in addition, her DD would get SS survivor benefits. that should give her plenty of money while she looks for a job.
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justme
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Post by justme on Nov 5, 2014 18:22:05 GMT -5
How many years of spending would the million dollar policy cover? Including insurance outside of an employer, money for any schooling to get you back into a career, and childcare.
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tskeeter
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Post by tskeeter on Nov 5, 2014 18:31:29 GMT -5
My understanding is that you never want the benificiary of your 401K to be the trust or estate. but she wants everything going through the trust. It is not the best because the RMDs are not as favorable when a 401k goes through a trust, but there are other reasons to have it go through a trust. As I undertand it, Archie is correct. When a 401K passes to heirs through a trust, what each heir receives is treated as a distribution in the year in which the 401K is distrubuted. The entire value of the inheritance will be taxed as ordinary income in the year of distribution. This could bump heirs into the maximum tax bracket in the year of the inheritance. If the 401K is inheritited by each benficiary without passing through a trust, the RMD rules can apply. This spreads the income over many years, and will probably reduce the tax rate applied to the inheritance by a very large amount.
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Deleted
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Post by Deleted on Nov 5, 2014 18:47:13 GMT -5
How many years of spending would the million dollar policy cover? Including insurance outside of an employer, money for any schooling to get you back into a career, and childcare. her DD is in kindergarten now.....unless her DH drops in the next 5 years, she won't need childcare. plus there's also 25% of the 401k and SS survivor benefits.
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justme
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Post by justme on Nov 5, 2014 18:54:23 GMT -5
How many years of spending would the million dollar policy cover? Including insurance outside of an employer, money for any schooling to get you back into a career, and childcare. her DD is in kindergarten now.....unless her DH drops in the next 5 years, she won't need childcare. plus there's also 25% of the 401k and SS survivor benefits. Yup, those all factor in. Just pointing out that if they are in a HCOLA or large spenders or she'd need to take night classes and didn't want her ten year old home alone the life insurance could get eaten up quick, but maybe it's enough. Yes, she'll get part of his 401k but presumably she's counting on that for her retirement now, so unless they have other retirement savings in her name only, 75% of her retirement savings goes poof if he dies. Which could be a lot of money she'd have to make up, which could be hard depending how old she is and what career she would start up. How many years of spending would the million dollar policy cover? Including insurance outside of an employer, money for any schooling to get you back into a career, and childcare. her DD is in kindergarten now.....unless her DH drops in the next 5 years, she won't need childcare. plus there's also 25% of the 401k and SS survivor benefits.
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quince
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Post by quince on Nov 5, 2014 19:26:15 GMT -5
If your DD is a minor, almost everything SHOULD go to you/her, maybe a token to the Skids. There should NOT be an equal split between a dependent minor and independent adults. There should be no wanting an equal split between a dependent minor and independent adults, even if they were all the cuddliest kids ever.
Trust should pay out until DD is 18 for support of the household, and at THAT time, if desired and if anything remains, four way split/dissolve.
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Deleted
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Post by Deleted on Nov 5, 2014 19:35:22 GMT -5
If your DD is a minor, almost everything SHOULD go to you/her, maybe a token to the Skids. There should NOT be an equal split between a dependent minor and independent adults. There should be no wanting an equal split between a dependent minor and independent adults, even if they were all the cuddliest kids ever. Trust should pay out until DD is 18 for support of the household, and at THAT time, if desired and if anything remains, four way split/dissolve. you seriously think a father should leave a 'token' amount to his kids from his first marriage in favor of his kid from his second marriage? don't we rip to shreds fathers who abandon their first family?
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souldoubt
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Post by souldoubt on Nov 5, 2014 19:38:49 GMT -5
Given everything you've said before I don't see why you would leave anything to the step kids at this time. I don't say that to spite them but rather because they're both adults who don't want anything to do with their dad unless it involves him giving them money. Doing so when he passes won't make them love him and it's just giving them what they want no strings attached. Regardless I'm in CA as well and my grandparents had a trust set up. When grandpa died grandma could have spent every last penny if she wanted to or she could have started giving it out then to her heirs but she lived the same style of life she had been living. When she passed per the trust everything was divided up accordingly.
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kittensaver
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Post by kittensaver on Nov 5, 2014 19:45:50 GMT -5
If your DD is a minor, almost everything SHOULD go to you/her, maybe a token to the Skids. There should NOT be an equal split between a dependent minor and independent adults. There should be no wanting an equal split between a dependent minor and independent adults, even if they were all the cuddliest kids ever. Trust should pay out until DD is 18 for support of the household, and at THAT time, if desired and if anything remains, four way split/dissolve. you seriously think a father should leave a 'token' amount to his kids from his first marriage in favor of his kid from his second marriage? don't we rip to shreds fathers who abandon their first family? The OP lives in a community property state and she has a minor child. If DH kicks the bucket, he should (sez me) be leaving everything to his WIFE. She should be using it to live and to finish raising her minor child. If she wants to turn around and dole it out to the kids when she no long needs or wants the remainder, then more power to her for caring about the family regardless of who is the birth mother.
If there are dysfunctional family issues and kids want "their" money "now," (and again I would argue that it is not "their" money), perhaps she can placate them by having DH take out another policy just for the benefit of the older kids (as a few other folks have suggested).
But I also agree with several other here who have said that her needs come first if she is ever widowed with a minor child. And community property and inheritance laws in CA are on her side.
ETA: remember that according to the OP, DH (at least right now) wants to leave NOTHING to his first family of children - - he's mad at them and burned out with their demands. It's OP who is trying to be conciliatory and figure out a way to leave money to them. Problem is, she's (maybe?) getting tangled up in herself trying to figure out how to do this when DH does not agree. At least that SEEMS to be the issue, unless I'm reading it totally wrong.
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quince
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Post by quince on Nov 5, 2014 19:46:29 GMT -5
If your DD is a minor, almost everything SHOULD go to you/her, maybe a token to the Skids. There should NOT be an equal split between a dependent minor and independent adults. There should be no wanting an equal split between a dependent minor and independent adults, even if they were all the cuddliest kids ever. Trust should pay out until DD is 18 for support of the household, and at THAT time, if desired and if anything remains, four way split/dissolve. you seriously think a father should leave a 'token' amount to his kids from his first marriage in favor of his kid from his second marriage? don't we rip to shreds fathers who abandon their first family? Yes, yes I do, until his kid from the second marriage is no longer a minor. If his kids from his first marriage were minors, I would say equal split. Because MINORS need parental support, and ADULTS should not. That is why when the minor becomes an adult, the remainder of the trust should be split...or all go to his widow. I do not believe ANYONE is entitled to an inheritance. I do think that if all kids were adults it would be bad form to leave all the money to one of them, but if the relationships aren't there (with ADULT children) there is no reason for money go just because of genetic ties. If they were all children from the same two parents, I would have the same opinion: Upon death of a parent, assets should go to the care and maintenance of minor children and surviving spouses, and after those are taken care of, be distributed to survivors based on relationships/equitably.
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Deleted
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Post by Deleted on Nov 5, 2014 20:10:30 GMT -5
Do you retain hopes of your daughter having a relationship with her siblings?
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tallguy
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Post by tallguy on Nov 5, 2014 22:09:57 GMT -5
How about a term life insurance on DH with the SKids as benificiaries. Then if DH feels like he really doesn't want ot leave anything to them, he can just stop paying th insurance premiums. Just an idea... we don't want to pay for any more insurances. He has a $1mil policy already. I figure a portion of his 401k is best, because that will be a percentage of whatever is in the account at the time. That would really help me as the more money he has, the more they will get.. and if he has a low amount, it will lower their inheritance. But I'd still have the life insurance to help me survive and raise DD. While I understand your desire to include his kids, other posters are correct that the primary responsibility is to you and your minor child. And as far as HIS kids, he seems indifferent at best, if not antipathetic. With that being the case, I would probably not bother with his 401k. Let it go to you to make sure you and your child with him are supported. You can always gift the step-kids money out of the life insurance proceeds. You would have a lot more control, in that you are giving them money a certain amount at a time as you see fit and as you are able. They would not have to bother with distribution rules of inherited 401k accounts or IRA's, nor would there be income taxes on monies received as gifts. You don't have to tell them that there may or may not be more each year, and if they are irresponsible or their behavior does not warrant its continuation, cut them off without a thought. Your husband deserves better than to have his money wasted by kids that apparently don't care much for or appreciate him. Simple, huh?
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moneymom
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Post by moneymom on Nov 5, 2014 23:17:12 GMT -5
How many years of spending would the million dollar policy cover? Including insurance outside of an employer, money for any schooling to get you back into a career, and childcare. The 1mil insurance is through DHs work. He's been there forever and it's extremely stable. If he lost his job for any reason, we'd have to start purchasing life insurance on our own, which we would definitely do, at the same amount. Yes, I realize it will be expensive now.
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moneymom
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Post by moneymom on Nov 5, 2014 23:19:07 GMT -5
How many years of spending would the million dollar policy cover? Including insurance outside of an employer, money for any schooling to get you back into a career, and childcare. I honestly think I could leave cheaply with no issue. I think $1mil might last me forever. I planned to go back to work eventually anyway. I already have a degree and left my former job to SAH for a few/several years while DD is young.
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moneymom
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Post by moneymom on Nov 5, 2014 23:34:36 GMT -5
Do you retain hopes of your daughter having a relationship with her siblings? yes. I have no idea how realistic it is that they can have a relationship in the future. DD absolutely LOVES them though and still talks about them to this day. Both skids were really good to her when they were around or visiting.
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moneymom
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Post by moneymom on Nov 5, 2014 23:36:16 GMT -5
you seriously think a father should leave a 'token' amount to his kids from his first marriage in favor of his kid from his second marriage? don't we rip to shreds fathers who abandon their first family? Yes, yes I do, until his kid from the second marriage is no longer a minor. If his kids from his first marriage were minors, I would say equal split. Because MINORS need parental support, and ADULTS should not. That is why when the minor becomes an adult, the remainder of the trust should be split...or all go to his widow. I do not believe ANYONE is entitled to an inheritance. I do think that if all kids were adults it would be bad form to leave all the money to one of them, but if the relationships aren't there (with ADULT children) there is no reason for money go just because of genetic ties. If they were all children from the same two parents, I would have the same opinion: Upon death of a parent, assets should go to the care and maintenance of minor children and surviving spouses, and after those are taken care of, be distributed to survivors based on relationships/equitably. DD is adopted but of course that shouldn't change a thing. So she is not genetically either of ours LOL.
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Deleted
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Post by Deleted on Nov 5, 2014 23:39:54 GMT -5
Do you retain hopes of your daughter having a relationship with her siblings? yes. I have no idea how realistic it is that they can have a relationship in the future. DD absolutely LOVES them though and still talks about them to this day. Both skids were really good to her when they were around or visiting. Well, for this reason only then I'd make sure they were left something meaningful from his estate. Otherwise, even if they are the most well meaning of individuals, there might be residual resentment.
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