We all know the story of Cinderella. Her father remarries, dies, and leaves his daughter behind with a stepmother who has very different ideas about who should benefit from the family fortune. And, of course, Cinderella also gets two stepsisters who seem to believe their main family responsibility is making her life miserable. Recently, a client asked me about something she had heard called a “Cinderella trust.” It is not an official legal term, but Cinderella’s story is actually a great way to explain a very real problem. Take away the glass slipper, the pumpkin carriage, and the talking mice, and Cinderella’s story is really about a father who failed to make sure that his new wife was provided for without putting his daughter’s future completely in her hands—or the hands of two stepsisters with questionable motives. That is a very modern blended-family issue.
The Problem with Leaving Everything Outright
Suppose Cinderella’s father owned the family home, investments, and other valuable assets. If he left everything outright to his new wife, those assets became hers to control. She could spend them, give them away, change her own estate plan, or ultimately leave everything to her own daughters instead of Cinderella.
Suddenly, those mean stepsisters are not just fighting over dresses and Prince Charming. They could end up inheriting Dad’s entire estate. You may completely trust your new spouse and still want to make sure your children from a prior relationship are protected.
A Trust Can Take Care of Both
Instead of leaving everything outright to his wife, Cinderella’s father could have created a trust. The trust might allow his wife to remain in the home and receive income or financial support during her lifetime. At the same time, the remaining assets could be preserved for Cinderella. When the stepmother died, whatever remained in the trust could pass to Cinderella rather than being redirected to the stepsisters. That kind of planning is probably what my client had heard described as a “Cinderella trust”: providing for a surviving spouse while making sure children from a prior relationship are not unintentionally left out.
The Trust Could Protect Cinderella Too
Cinderella was also young when her father died. Even if she was entitled to a large inheritance, handing her everything at once may not have been the best idea. Her father could have directed the trustee to use money for her education, housing, not to mention real dresses, shoes and transportation.
Choosing the Right People Matters
Cinderella’s father also could have chosen who would manage her inheritance and who would care for her while she was still a minor. That person did not have to be his new wife.
Creating Your Own Happily Ever After
Most blended families do not involve evil stepmothers, mean stepsisters, or midnight curfews. But they do involve real relationships, real money, and real concerns about making sure everyone is protected. If you have remarried and have children from a prior relationship, do not simply assume things will work out. Put your wishes in writing. And that may be the closest thing estate planning has to a happily ever after.
