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Blended Family Issues
Little attention has been paid to the estate planning issues confronting blended families. A blended family or step family is often comprised of children who are natural to only one parent, as well as children that are natural to both parents. Blended families face many issues that the traditional “nuclear” family does not face. These issues include disinheriting ex-spouses, protecting children from the previous marriage, providing for the new spouse, providing for the children of the new marriage, and minimizing estate taxation.
Absent appropriate planning your “ex” may be appointed by the Court to oversee any legacy you leave to your kids. There are even situations where your “ex” may inherit your assets. In this scenario your former spouse, as next-of-kin to your deceased children may inherit from your estate.
Testamentary Trusts are often used to avoid the problems associated with blended families. A Testamentary Trust is a Trust that is created by a Will and only operative after you pass away and the Will is admitted to probate. You can name someone you trust to be the Trustee of this Trust, who will make disbursements to your children for their health, education, and support. In your Will you can also specifically disinherit your ex-spouse to make sure under no circumstances are they to get anything from your estate. Furthermore, in your Last Will and Testament or a Trust you can make provisions to protect your new spouse.
In the absence of a Prenuptial Agreement to maintain separate assets, most spouses in blended families tend to blend (combine) their wealth. For example, they title their respective assets in the names of both spouses, and also designate one another as the primary beneficiary of their respective retirement plans and life insurance policies. However, if you predecease your new spouse, then you may forever disinherit your own children of your share of such blended wealth! Thereafter, upon the death of your new spouse, your assets may be inherited by your stepchildren, or even by your new spouse’s next spouse and their children. A Will with Trust provisions or a Revocable Living Trust can prevent this problem.
We have seen situations where a husband and wife visit our office to do some estate planning. Both spouses have been married before, and both have children from those prior marriages. We often counsel them on the value of Trusts. Some folks do not want to make the investment in an advanced planning strategy. The dialog typically sounds like this: “We love ALL of our children and stepchildren equally, and everybody gets along fine. We just want Wills where everything will go to the surviving spouse and then equally to all the children and stepchildren at the second death.” The clients opt for a Will set up like above. Then Mom dies. Several months later Dad is back in our office, usually with his kids, and says, “You know we’ve been thinking (notice the we), and we don’t see my wife’s children at all anymore. We would like to change my Will to leave everything to my children.” What happened to all of the assets that Mom helped to acquire? Mom’s children are left with nothing.
Proper planning can control where your assets go, and how they are used when they get there. This is especially important when planning for blended families and their unique needs. Although blended families face unique issues, these obstacles can be overcome through proper planning.
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Estate Planning • Asset Protection • Charitable Planning • Probate Administration • Medicaid Planning • Premarital Planning