Modern, Proactive Estate Planning For Today’s Families

The notion of a “traditional” family has certainly changed over time. The days of “Leave it to Beaver” are becoming less and less common. In fact, today, only about 35% of American families are comprised of a traditional heterosexual married couple with children. Apart from 35% that are labeled “traditional,” 31% are childless families and 34% are considered “modern” families. The modern family category can include many characteristics such as: blended families, divorced families, cohabiting couples, same sex couples, intentionally single parents, single persons, polyamorous relationships, or “family” groups with non-marital children. Those of us who advise grantors and settlors of trusts need to ask some pointed questions to make sure that the trust will actually accommodate the needs and lifestyles of its current and future beneficiaries. Today’s trust documents need to have greater flexibility and thoughtful definitions to guide a trustee who must deal with the needs and desires of the modern family.

Longevity Increases

It should come as no surprise that we are living longer. Improved public health measures introduced in the mid-nineteenth century, such as cleaner drinking water, better sanitation and widespread use of vaccines, began to decrease the number of deaths in early and middle life, leading to an increase in overall life expectancy through to the mid-twentieth century. This trend continues today. The average female life expectancy is 81.1 years, and for males it is age 76.1. For those individuals who have access to, and enjoy, more wealth (and therefore more likely to adopt a trust to distribute their wealth) at age 50, a female’s life expectancy is age 91.1 years, and for a male 88.8 years. Add to that increase in life expectancies the current planning strategy to avoid the generation skipping transfer tax by creating a dynasty trust that is designed to last for several generations of beneficiaries, and you have new challenges. The remainder beneficiaries of the trust may have to wait a long time, and they will be much older, before they can expect to receive a distribution from the trust. If a dynasty trust is created, the trustee will have to be even more vigilant in making prudent investments that must provide for these much longer life expectancies. Additionally, as the generations pass, the group of potential beneficiaries of a dynasty trust will probably grow exponentially in size.

Marriage Declines

In the 1950’s, married couples comprised close to 80% of American households. Today, that number has decreased significantly, and is less than 50%. The fastest growing segment of the American household population is unmarried, heterosexual couples. This is true for both younger and older adults. In 1960, 59% of young adults were married before age 29. Whereas today, only 18% in that age demographic are married. The number of older Americans who cohabit without marriage increased 75% in just the last 10 years. Twenty-six percent of American children are now raised in a single parent household.

Same-Sex Marriages Increase

While heterosexual marriage may be on the decline, we now have legal same-sex marriages, with all of the rights that extend to a surviving spouse. On June 26, 2015, the US Supreme Court issued a landmark ruling that granted same-sex couples a constitutional right to marry. Today, there are over 1,138 provisions in federal laws that treat the relationship between two married individuals differently from any other relationship. Surveys conducted by Gallup in 2017 found that about one-in-ten LGBT Americans (10.2%) are married to a same-sex partner, up from the months before the high court decision (7.9%). As a result, a majority (61%) of same-sex cohabiting couples were married as of 2017, up from 38% before the ruling.

Fertility Declines

In recent years, the US fertility rate has modestly dropped. Back in the 1950’s the typical American household had three children. The most common household today is that of a single individual, followed by a married couple, next a married couple with one child, and only then a married couple with two children.

Assisted Reproductive Rights

With the advent of assisted reproductive technologies, more children will be born outside of traditional family structures; consider an elective single-parent family. A relatively new term related to this topic, a concept calling dibling families. In dibling (donor-sibling) families, children of the same male genetic donor, but different mothers, are raised in settings where they know and interact with each other and their genetic father.

Divorce Increases

Contrary to previous generations, many Baby Boomers find little social stigma associated with a divorce. Forty-two million American adults have been married more than once. A surprising study of divorced individuals notes that they have the highest rates of intestacy, when a person dies without a will, in the US. The Health and Retirement Study at the University of Michigan (2017) determined that while the general intestacy rate among older (age 50 and up) Americans is 42%, among divorced adults the intestacy rate is at 62%.

Blended Families Increase

Due to more divorces, there are a greater number of remarriages than in prior generations, which results in an increase in blended families. One out of six American children now grow up in a blended family with 40% of Americans having at least one step-relative. Forty-two million Americans have been married more than once. The increase in divorce and blended families has also led to new household phenomena like “three parent families,” and the liberalization of custody laws where a second spouse may be granted parental rights. Some states even recognize a third parent as a de facto parent. The same goes with more expansive adoptive rights. For example, Section 613 of the Revised Uniform Parentage Act authorizes the third parent to adopt a child without the former spouse/biological parent being required to relinquish their parental rights.

Sexual Identity

States are starting to legally recognize sexual identity as a civil right. As a result, we see more individuals who publicly identify with a different gender, or in some cases, no gender at all.

The most recent US Census data (US Census Bureau, “American Families and Living Arrangements,” 2013) indicate that 31% of American households are without any children. 35% are “traditional” families (heterosexual, married and with children) and 34% are “modern” families (blended, multi-generational, same-sex, and single parent.) These statistics indicate that a trustee’s fiduciary duty of impartiality will be severely tested with a disparate set of beneficiaries of the same trust.

The way contemporary beneficiaries lead their lives and the manner in which they form relationships and establish families may not reflect the patterns contemplated by the settlor when the trust was drafted. Thus, complicating the balancing act of a trustee to carry out the settlor’s intent, balanced against the obligation to administer the trust for the benefit of the beneficiaries. Adding some expansive definitions will help guide the trustee in this task. Modern families may benefit from a broader “non-traditional” approach to estate planning, newer and more flexible documents, and different tactics to the entire process including meetings and communications. Call your client centric team to assist in reviewing your current estate plan to see if any changes or amendments are warranted to better accommodate your family situation.