South Dakota Estate Planning - Planning for Step-Children

If you have married someone and your spouse has children from a different relationship, these children are your step-children. Even if you have helped raise the child from a very young age, unless you have adopted the child, they would not be considered your child for inheritance purposes. The implication of this can be incredibly important.

Here’s an example: When Clark met Diana, Diana had a newborn child, Bruce. Clark married Diana a year later. They raised Bruce together, but Clark never adopted Bruce. Diana died while Bruce was in college, leaving Clark all her assets. Unfortunately, Clark didn’t have an estate plan. As a result, when Clark died the following year, he was intestate (without a will). According to the laws of the state where Clark lived when he died, since his parents and spouse had predeceased him, his estate would go to his siblings, with whom he and Diana had bad relationships. Bruce really needed the money to pay for college and to get a good start in life. But now he’d potentially be penniless and likely feel abandoned by Clark. 

Clark and Diana could have avoided this unfortunate situation. Of course, Clark could have adopted Bruce when Bruce was young. However, that may not have been possible for numerous reasons. Also, if Clark didn’t have an estate plan, even if he had adopted Bruce, Bruce would have inherited the assets outright.

If Clark had left his estate to Bruce in a trust, this would have solved numerous problems. First, Clark's assets would have gone to Bruce whether or not Clark had adopted Bruce. Second, Clark could determine how Bruce should get the assets. For example, Clark could have provided for Bruce to receive the assets in trust instead of outright. If Bruce had creditor issues, Clark could have left the assets in a trust which would have protected the assets from Bruce's creditors. If Bruce was too immature to manage the assets, Clark could have left the assets in a trust with someone else named as trustee to manage the assets until Bruce reached a suitable age. The trustee could provide Bruce what he needed from the assets in the trust and then turn the balance over to Bruce when he reached the age set by Clark.

Unfortunately, step-children can often get forgotten in the estate planning process. If you intend to leave assets to your step-child, you need to plan to do so.