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Table of Contents
Thorough estate planning helps ensure your wishes are carried out after you die. However, when you have a blended family, the process gets more complicated. You may need to consider additional questions and variables in helping provide for your loved ones after you pass.
There's no one-size-fits-all solution to estate planning for blended families. But with careful planning and guidance from a qualified team of experts — including an estate planning attorney — you can develop blended family wills that better fit your family and address your priorities.
The Importance of Communication in Blended Families
Many blended families are made up of children from current and previous relationships, plus current spouses and ex-spouses or co-parents. You likely won't be able to make everyone happy with your choices. Still, strategic estate planning can help stave off potential disagreements, grudges and even legal battles. The key is to plan ahead and communicate openly with all parties.
This includes taking stepchildren into account. Doing so may require difficult conversations with former partners — including your exes and your current partner's exes. But it's important to have these conversations, even if they're uncomfortable. Estate planning can help your loved ones avoid or at least streamline the probate process. It can also help minimize the taxes incurred by your estate when you die.
Beyond spelling out your wishes for your assets, it's a good idea to designate a health care proxy in your will in case you're ever disabled by illness or injury. A proxy is a person designated to make decisions about health care and end-of-life planning on your behalf should you be unable to do so yourself. Take time to address this aspect of your will as you walk through the estate planning process.
Legal Considerations & Challenges
Before you make any major decisions, seek the guidance of an attorney who specializes in estate planning for blended families. A seasoned professional can guide you and help make sure you cover all your bases as you map out your intentions and put your wishes in writing.
Common challenges include deciding how to divide an estate between children, particularly when stepchildren are involved. You may wish to factor in any other inheritances that stepchildren might receive from their biological family members while considering how, or if, you will provide for them. Additionally, there's the possibility that your current spouse will remarry after you die. In that case, you may wish to keep your assets within your own family rather than potentially being inherited by your widow's new spouse one day.
Many people wonder what's fair when it comes to estate planning in a blended family. Unfortunately, there's no easy answer. The concept of "fair" quickly becomes murky when you think about how to provide for spouses and children. You may also have elderly family members under your care or adult children who are unable to care for themselves.
As such, you may need to consider a multitude of scenarios when outlining your intentions and dividing your inheritance. An attorney can walk you through the variables and help ensure your plan is airtight.
Tailoring Wills & Trusts for Blended Family Dynamics
A blended family includes many moving parts. To address the complexities of your situation, you need an estate plan tailored to you and your family.
Wills and trusts are two valuable tools in estate planning for blended families. If you do die without a will (termed "intestate"), your estate must go through probate, which could lead to a lengthy legal process and a complicated dynamic between your surviving loved ones. At a minimum, you should create a will outlining your wishes. Within your will, you can also address issues such as guardianship plans for children under age 18.
Some people prefer to simplify their wills by leaving all their assets to their spouse. For others, estate plans require added considerations. Perhaps your spouse will remarry after you die and you want to prevent their future partner from inheriting your wealth. Perhaps you want to be certain that your children from a previous relationship will inherit your wealth, even if they have a falling out with your surviving spouse.
In such cases, trusts allow for added flexibility and control to designate exactly how your assets will be allocated after you die. There are many different types of specialized trusts you can establish, including trusts designed to support beneficiaries with special needs, charitable trusts and even pet trusts.
One benefit of trusts is that they allow more control over how you split your assets. However, one drawback is the cost: Between set-up fees and ongoing maintenance, trusts usually make the most sense for individuals with enough wealth to justify the expense.
Trusts also vary in nature and complexity. Some trusts are revocable, meaning you can change the terms or dissolve a trust after it's established. Others are irrevocable, meaning that once they're created, you can't change the terms or swap out the beneficiaries.
In a blended family, you may want to consider the following trusts:
QTIP Trusts
Looking for a way to protect your assets in a second marriage? A qualified terminable interest property (QTIP) trust allows you to provide for your surviving spouse while dictating how the trust assets will later be allocated after your spouse passes away. This lets you guarantee your assets are ultimately passed down to your children or other heirs, rather than your spouse's new partner if they remarry.
Bypass Trusts
Bypass trusts are designed to help minimize estate taxes and ultimately protect assets for designated beneficiaries. It's another tool for helping ensure your children receive your assets while providing some income for your surviving spouse. A family trust, or AB trust, is a common option for blended families.
A financial professional can help craft a personalized approach to establishing your will and trust.
Estate Tax Implications & Management
Think ahead about how your plans will account for debt, taxes and administrative costs.
In most cases, inheritance tax is paid to the state by beneficiaries. Estate taxes, however, are paid by the deceased person's estate to the federal government.
The average American's assets aren't subject to estate tax based on the estate tax exemption amount defined by the Internal Revenue Service each year.1 But for wealthy families, these taxes can take a significant chunk from your loved ones' inheritances. A financial professional can identify strategies to help reduce the taxes you and your loved ones owe. A family trust or a dynasty trust — a popular option among wealthy families to pass wealth across generations — are two options worth considering.
You will also have to pay administrative costs if you establish a trust. These expenses include attorney fees, trustee fees and other ongoing operational costs. In total, establishing a trust can cost many thousands of dollars. Take inventory of your financial situation to decide if the resources required for doing so makes sense for your family.
Guardianship & Future Planning for Stepchildren
Within your will, get specific about guardianship plans for children and stepchildren. Guardianship in a will designates a responsible adult to look after minor children after you die. You may also designate guardianship for adult children or loved ones who are unable to care for themselves due to disability or illness.
In a blended family, you may wish to look into co-guardianship arrangements for stepchildren. Also, consider any potential guardian's relationship with surviving children and their capacity to care for your children if you pass away.
Don't designate a guardian for your children or stepchildren before making certain they're willing and able to take on the role. It's also a good idea to designate an alternate in case something happens to the other guardian.
Expert Tips & Common Pitfalls to Avoid
Estate planning strategies can vary considerably depending on individual circumstances. These three tips can help you avoid common pitfalls as you spell out your wishes.
Use an Estate Planning Attorney
An experienced lawyer is invaluable when it comes to crafting a complex estate plan. An attorney trained on the ins and outs of blended family wills and trusts can help make sure you come away with a solid plan that protects your and your loved ones' best interests.
Remember to Update Your Beneficiaries
Any major life change should prompt a review of your beneficiaries. After a divorce, for example, you may want to ensure that your ex-spouse is no longer listed as a beneficiary on accounts for investments, life insurance, 401(k) and retirement plans. Update your health care power of attorney, too, if necessary.
Revisit & Revise Your Plans
As family dynamics and relationships shift, you may find that the will you created five years ago no longer reflects your wishes today. Review your estate and guardianship plans on a regular basis — at least once per year — and work with your attorney and financial professionals to make any necessary updates.
Support for Your Blended Family
Estate planning with a blended family is no small feat. That's why it's important to take the time to make plans that protect your assets and your loved ones. With open communication, thoughtful consideration of your circumstances and assistance from a skilled estate planning attorney, you can create an estate plan that honors your needs and wishes.
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