Estate Planning Issues for the Modern Family

As the name suggests, ABC’s television show Modern Family depicts the relationships and experiences of a fictional extended family.

Throughout the series, the show addresses many of the issues that real families deal with every day. These include blended families, family-owned businesses, minor children, remarriage, unequal financial needs, and relationships that do not always fit neatly into traditional categories.

For a close-knit family like this fictional one, estate planning is crucial. A thoughtful plan can help protect family members if someone dies, becomes disabled, or is unable to make decisions independently.

By examining some of the planning issues the characters would need to address, you can begin considering how similar questions might affect your own family.

What Estate Planning Issues Affect Modern Families?

Every family is different, but many modern families need to address the following questions:

• What will happen to a family-owned business?
• Will stepchildren or other nonlegal family members inherit?
• Who should care for minor children?
• How can a surviving spouse be protected?
• Should every child receive an equal inheritance?
• Would a trust provide better protection than an outright gift?

Clear estate planning documents allow you to answer these questions before a crisis occurs.

Planning for the Family’s Business Interests

Over the course of Modern Family, several family members own or operate businesses. Whether a business is a hobby, an investment, or a person’s full-time job, it requires special consideration when planning for the future.

A business owner’s estate plan should coordinate with the company’s organizational documents, ownership agreements, and succession plan.

How Is the Business Owned?

The first question is how the business is legally structured.

A business may operate as a:

• Sole proprietorship
• Partnership
• Limited liability company
• Corporation
• Family-owned enterprise with multiple owners

Depending on the structure, the company’s governing documents may already establish what happens when an owner dies, becomes incapacitated, retires, or wants to transfer an ownership interest.

Those documents may include an operating agreement, partnership agreement, shareholder agreement, or buy-sell agreement.

If the existing documents do not address the owner’s death or incapacity, legally enforceable instructions may be needed to facilitate the transition.

Who Should Take Over the Business?

Business owners can become so caught up in daily operations that they do not stop to consider who should eventually take over.

Like Jay, a business owner may want a child to continue the family business. However, the child may not share that goal or may not be prepared to assume responsibility immediately.

It is important to discuss succession plans with the intended successor. The owner can then begin preparing that person to manage the company and determine whether additional training, insurance, or transition planning is needed.

Should the Business Pass Directly to the Next Generation?

The age and experience of the beneficiary also matter.

A business interest may not be an appropriate outright inheritance for a young or financially inexperienced beneficiary. Instead, a trust can hold the interest and appoint someone qualified to oversee it until the beneficiary is prepared to participate.

The trust can provide specific instructions about:

• Who will manage the business
• Whether the business may be sold
• When a beneficiary may become involved
• How business income should be distributed
• When the beneficiary may receive ownership or control

These instructions can provide more flexibility than relying on the age at which state law considers a child to be an adult.

Estate Planning for Blended Families

The characters in Modern Family include several generations of blended families. Their relationships demonstrate why a traditional estate plan may not work for every household.

When deciding who should receive their money and property, members of blended families must evaluate both their legal relationships and their personal bonds.

Stepchildren May Not Automatically Inherit

Jay frequently refers to Manny as his son, and Manny spent many of his formative years living with his mother and Jay. However, a close personal relationship does not necessarily give a stepchild the same inheritance rights as a biological or legally adopted child.

In Maryland, stepchildren do not automatically receive a share under intestacy law. If a stepparent wants a stepchild to inherit, that intention should be stated in a legally enforceable will or trust.

The same issue could affect Haley and Dylan. Dylan has children from a previous relationship, and Haley may or may not want those children to receive her individually owned property or anything she inherits from her parents.

Without clear documents, the legal result may be very different from what family members expect.

Family Terms Should Be Defined Clearly

Estate planning documents often use terms such as “children,” “descendants,” or “issue.” In a blended family, those terms should be defined carefully.

The plan should make clear whether they include:

• Biological children
• Adopted children
• Stepchildren
• Foster children
• Children from a spouse’s previous relationship
• Future children or grandchildren

Specific language can reduce uncertainty and help prevent disagreements after a death.

Choosing Guardians for Minor Children

Several children in the show would need guardians if both of their parents died.

A guardian nomination allows parents to state who they want to care for their children. The Maryland Register of Wills identifies naming a guardian for minor children as an important reason to create a will.

Planning for Joe

Manny states that he wants to be Joe’s guardian if Gloria and Jay die. However, Gloria and Jay would still need to formally nominate their preferred guardian in their estate planning documents.

A nomination is not an automatic appointment. A court will make the final decision based on the child’s best interests, and another person may contest the parents’ choice.

Jay and Gloria should consider discussing their decision with both sides of the family. A frank conversation could reduce the possibility of a guardianship dispute or disagreement about whether Joe should remain in the United States.

Planning for Lily and Rex

Lily and Rex would also need a guardian if Cameron and Mitchell died.

Without a clear plan, the Pritchett and Tucker families could disagree over who should raise them. Although Lily spent much of her life near Mitchell’s family, the family moves to Missouri at the end of the show and begins living closer to Cameron’s relatives.

Rex may grow up with stronger ties to Cameron’s family. These changing relationships could create conflict if the parents do not record their wishes.

Planning for Poppy and George

Poppy and George would need guardians if something happened to Haley and Dylan.

Haley and Dylan may not have substantial property, but their children still deserve basic estate planning. This includes nominating a guardian and at least one alternate.

Although the couple lives close to Phil and Claire, Dylan’s mother, Farrah, begins appearing after Haley becomes pregnant. She might also want to raise the children if Haley and Dylan are unavailable.

A written plan would help the court understand the parents’ intentions.

The Court Makes the Final Decision

If you have minor children, think carefully about who should raise them if you cannot.

No one will care for them exactly as you would. Still, nominating a guardian in your will makes your wishes clear and gives the court important guidance.

You should also name one or more alternate guardians. Your first choice may be unable or unwilling to serve when the appointment is needed.

Discussing your decision with family members ahead of time may also reduce the possibility of conflict after your death.

Protecting a Surviving Spouse

Every married couple must consider what should happen when the first spouse dies.

Couples like Phil and Claire may have earned and accumulated most of what they own during their marriage. They may think of everything as “theirs” and want the surviving spouse to receive it all.

Leaving everything outright to a spouse may be appropriate in some circumstances. In others, a trust may offer additional protection.

Risks of Leaving Everything Outright

Property inherited outright becomes the surviving spouse’s property. Depending on the circumstances, it may later be affected by:

• Creditors
• Financial exploitation or scams
• Poor financial decisions
• Remarriage
• A later change to the surviving spouse’s estate plan
• Long-term care expenses

A trusting and well-meaning person like Phil might fall victim to a scam or give away substantial amounts of money based on a sad story.

Claire might eventually remarry. Without careful planning, she could unintentionally disinherit Haley, Alex, and Luke by leaving the remaining property to a new spouse.

Using a Trust for a Surviving Spouse

A trust can provide for a surviving spouse while also preserving the remaining property for children or other beneficiaries.

One possible tool is a qualified terminable interest property trust, commonly called a QTIP trust. Depending on how it is drafted, this type of trust can:

• Pay income to the surviving spouse
• Permit distributions of principal for specified needs
• Provide for health, education, maintenance, and support
• Determine who receives the remaining property after the spouse dies

A QTIP trust has specific tax and drafting requirements. Whether it is appropriate depends on the couple’s property, goals, tax circumstances, and family relationships.

Deciding How Much Each Family Member Should Receive

A modern estate plan does not necessarily have to divide everything equally.

Within the show’s blended family, Jay has a spouse, two adult children from a previous marriage, a minor son, an adult stepson, grandchildren, and great-grandchildren. He must decide who should receive his property, how much each person should receive, and when they should receive it.

Providing for a Spouse and Children

Jay might leave everything to Gloria, possibly in trust, for her needs during her lifetime. The remaining property could then pass to Claire, Mitchell, and Joe after Gloria dies.

Alternatively, Jay might give Claire and Mitchell part of their inheritance immediately while still providing for Gloria.

He must also decide whether to create a separate inheritance for Joe or rely on Gloria to provide for him if she survives Jay.

These are personal decisions, but they should be made intentionally and documented clearly.

A Surviving Spouse May Have Elective-Share Rights

When planning for a surviving spouse, it is important to consider state law.

Many states allow a surviving spouse to claim a minimum portion of an estate, even if the deceased spouse’s will leaves less. This protection is commonly known as an elective share.

Maryland provides a formal process through which a surviving spouse may elect to take an elective share.

A surviving spouse may be able to disrupt an estate plan if the plan does not provide the required share and the spouse has not validly waived that right. These issues should be addressed before the documents are signed.

Equal Is Not Always the Same as Fair

Phil and Claire must also decide how to divide their property among their children and grandchildren.

Their three children have very different circumstances and may have different needs.

Haley has two children to support and might benefit from a larger share. Alternatively, Phil and Claire could set aside money specifically for their grandchildren.

Alex may have strong earning opportunities because of her education and career. Luke may need more financial assistance or guidance.

A trust for Luke could provide for education and worthwhile business opportunities while protecting the inheritance from poor decisions.

Parents should consider whether they want to leave equal amounts, adjust inheritances based on need, or provide certain benefits through separate trusts.

If the distributions will be unequal, careful drafting and family communication may reduce misunderstandings.

Estate Planning Should Reflect Your Actual Family

The modern family can include spouses, domestic partners, stepchildren, children from previous relationships, adopted children, unmarried couples, and family members with very different financial needs.

The law may not recognize every emotional relationship in the same way your family does. A person you regard as a child, spouse, or close family member may have no automatic right to inherit.

A complete estate plan can clarify:

• Who should inherit
• Who should manage the estate
• Who should care for minor children
• How a family business should continue
• How a surviving spouse should be supported
• Whether property should be distributed outright or held in trust
• How beneficiaries with different needs should be treated

Clear instructions can protect your family and reduce the risk of conflict.

We Can Help Your Modern Family Plan for the Future

For real families across the country, not just fictional ones on television, an estate plan is an important way to protect loved ones and hard-earned property.

At McDonald Law Firm, we work with families of all shapes and sizes to create plans that reflect their unique relationships, concerns, and goals.

Attorney André O. McDonald assists clients in Howard County, Montgomery County, and the District of Columbia with estate planning, special needs planning, Medicaid planning, and related matters.

To schedule a consultation, call:

• Howard County: 443-741-1088
• Montgomery County: 301-941-7809
• District of Columbia: 202-640-2133

DISCLAIMER: THE INFORMATION POSTED ON THIS BLOG IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND IS NOT INTENDED TO CONVEY LEGAL, INSURANCE, OR TAX ADVICE.