Theirs. March 2017
By Timothy S. Barkley, Sr.
Pleasantries over, they addressed the issues at hand. “We’ve decided” she said, “half to his kids and half to mine. So, because he has 2 kids and I have 3, but one is both of ours, it should be 5/12 to Gavin, 25% to his son, and 1/6 to each of my two from my first marriage.”
“That’s right,” he affirmed. “But my son is getting my 401(k), so that’s his 25%.”
“Whoa!” interrupted the lawyer. “I’m just a humble lawyer, not a math genius. 5/12?”
She laughed. “Half to his kids, split between his son from his first marriage and Gavin. Half to my kids, split between my two from my first marriage … “
“And Gavin,” completed the lawyer. “Let’s see … half of half is one-fourth, plus one-third of half … one-sixth … is …”
“Five twelfths!” she exclaimed.
“But Herb’s son gets his 401 as his 25%, and that doesn’t pass under the will. So under the will Gavin is getting …. I feel like I’m in high school algebra … “ He looked at Herb and Michele, who looked away.
“Anyway, I’ll work it out.
“Most people wouldn’t want Gavin to get everything when he turns 18. That might be a lot for a high school graduate to handle. How old are your kids,” he asked Michele.
“They’re both in their thirties,” she replied.
“Old enough to get their share in a lump sum? Or do you want them to get it over time?”
“I think they’re responsible enough,” she affirmed.
“Then I think we just need a trust for Gavin, since he’s still pretty young. Most people want the trust to cover his cost of living until he finishes college, his college, and anything else reasonable. My trust usually covers college until he gets a bachelor’s degree, and basic living expenses, until he turns 25.
“After that degree or that age it’s up to your trustee to decide what he gets. That way he can’t just hang around college as a ‘professional student’ and live off your trust. Then he gets whatever is left when he turns 25, or 30, or whatever age you pick. In the meantime, your trustee can give him money for reasonable things, like buying a house, getting married, starting a business. Does that make sense?”
They nodded. The lawyer continued, “I’m sure you don’t have any worries about each other getting greedy and messing everything up. But stranger things have happened. And by the time Herb ‘assumes room temperature’” here he paused for cognizance to dawn “Michele might not know what’s going on. There might be no love lost between Herb’s first son and Michele’s two, so they might want the 401. Or Michele might be in a nursing home that will want everything it can get its hands on to pay that big bill.
“And remember, Michele wants the investments from her first husband’s life insurance to go to her kids from her first marriage. If she dies first, Herb’s son might want to help his father get some of that money. If Herb has dementia, he might not be able to control the situation.
“State law says you each have a right to 1/3 of the estate of the other, no matter what your wills say. And federal law says Michele gets Herb’s 401(k). You can change that with a marital agreement, but without one, Michele gets 1/3 of the assets that pass under Herb’s will and the whole 401(k) – no matter what else she gets. And Herb, if he survives, gets 1/3 of the invested life insurance – no matter where it came from.
“Maryland law doesn’t include jointly titled assets, retirements, pensions or insurance in that calculation, at least right now, but Virginia and other states have an ‘augmented estate’ concept that adds all that back in to the estate, then computes the spousal share, then subtracts from that assets that pass to the spouse outside your will. Maryland doesn’t have that law, but it’s been proposed for years and, I think, is coming soon to a legislature near you.
“This cuts both ways. Maryland law ignores all that stuff, so you could leave your spouse your 401, your life insurance and your jointly titled house, and he or she would still have a claim against anything that didn’t go to him or her under your will. With an augmented estate, it can be fairer since everything is counted, but either way, a marital agreement can control it.
“You should probably talk about one of those. It can help years from now, when nobody is remembering clearly.”
Next time … Marital Agreements
Attorney Tim Barkley
The Tim Barkley Law Offices
One Park Avenue
P.O. Box 1136
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