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The Moneyist: My husband and I have two children. He has a daughter from a previous marriage. How much should I leave my stepdaughter in my will?

Dear Quentin,

I am retiring soon with around $850,000 in stocks, $350,000 in a pension and about $30,000 in the bank. My husband and I own our home — worth around $275,000 — outright. We have been married for 37 years and have two children together, a son and a daughter, who are both adults and responsible for themselves. Neither of our children have partners or children of their own. 

My husband has a daughter from a previous marriage, my stepdaughter. She has a daughter, our granddaughter, who also has a daughter, our great-granddaughter. My stepdaughter and step-granddaughter live a significant distance from us. When my husband and I married, my stepdaughter was 15, and she never lived with us. 

Over the years we have helped them both financially, and we are happy to do so. I like my stepdaughter quite well and we get along well — she has been to visit us when we have flown her and our granddaughter to where we live — but, for me, there really isn’t a mother-daughter relationship, but more of a friendship. 

‘The relationship my husband has with his daughter and granddaughter is more one-sided, with him doing most of the reaching out.’

I don’t have a strong bond with our granddaughter, either. In addition, the relationship my husband has with his daughter and granddaughter is more one-sided, with him mostly reaching out to them, but he loves them dearly and figures that is just how things worked out due to distance. Often we only hear from his granddaughter if she needs help. 

My husband has a whole-life insurance policy, which he has left to me if he dies first. Depending on my finances at the time of his death, if I’m OK financially, I’m willing to divide it between the three children (our two kids and my stepdaughter). If we go together or I go first, the proceeds of his insurance policy will go to the three children.

Due to my husband’s health issues with cancer, I was the primary breadwinner and all the retirement funds are under my name. He does have Social Security. He is 11 years older than me. I’m writing my will and I want to include my stepdaughter, but I don’t know what percentage to give her. Any advice? 

The Stepmother 

Dear Stepmother,

Your stepdaughter’s relationship with her father, your husband, is somewhat distant likely because she was raised by her mother. There is also a physical distance between them. She may or may not have residual feelings over how much her father was involved in her life, regardless of whether anyone was to blame for that. But while she could probably reach out more to your husband, the current situation is a result of her parents’ divorce. It is not her fault.

Although stepchildren do not automatically inherit if a stepparent dies intestate — that is, without a will — most U.S. states exempt both children and stepchildren from inheritance tax. That is, they are recognized equally as children when it comes to inheritance tax if they are left money in a stepparent’s will. But it’s also imperative that you list your children and stepdaughter by name in your will. If you simply say “children,” the probate court will not include your stepdaughter.

‘If you leave your stepdaughter a smaller portion of your estate, it will only compound feelings of being less than or apart from her half-siblings.’

A stepchild may feel excluded if one parent goes on to have a family with another partner. If you leave your stepdaughter a smaller portion of your estate, it will only compound feelings of being less than or apart from her half-siblings. For that reason, I believe the simplest and kindest course of action is to leave your stepdaughter the same percentage in your will that your husband was planning to leave her: Split your estate three ways.

But you also have the option to name items of special sentimental value and distribute those to your own children, while leaving something of special significance from your husband’s belongings for your stepdaughter. That way, you will have treated her equally and thoughtfully, and she can take that message with her for her remaining years. She held equal importance in your family, and she could use some of that money for her daughter and granddaughter, too.

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.

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