If you’re a blended family, you’ll need a detailed estate plan for your loved ones to follow when you and your spouse pass away. Blended families are beautiful but can also be complicated by unresolved conflict. You don’t want your loved ones to fight over your assets or harbor resentment about tensions tearing them apart. You want everyone to have a harmonious family unit that will last long after you’re gone. Here is what you should know about estate planning for blended families.
Make a Plan for Your Stepchildren
If you die without making provisions for your stepchildren, all of your assets will automatically go to your spouse and biological children. If you want your stepchildren to inherit some of your assets, add them as beneficiaries to your accounts such as your taxable brokerage account, retirement accounts, and savings accounts as well as your life insurance policies.
Another idea is to add your stepchildren as beneficiaries of your living trust as well as your biological children. This ensures that none of the children are excluded from your assets after you pass away.
Consider a Prenuptial Agreement
Prenuptial agreements are often viewed as a bad thing but they can be a tool for estate planning for blended families. Suppose you have assets that you accumulated before getting married and you want those assets to be passed on to your biological children and not your spouse or stepchildren. A prenuptial agreement can protect these assets should you divorce.
Appoint The Right Trustee Over Your Living Trust
If you’re creating a living trust for your spouse, biological children, and stepchildren, it’s crucial to appoint the right trustee over your living trust. You can give clear directions to the trustee on how and to whom your assets will be distributed. The trustee can follow your instructions and resolve any tensions that could arise between your spouse and the children.
Appoint Your Powers of Attorney
You should also appoint your powers of attorney to handle your financial and medical affairs if you become incapacitated. Generally, your spouse may become your power of attorney but what if your spouse dies before you? Then you may appoint one or two of the children to fill these roles. Talk with your adult children about whether they’re willing or able to be your powers of attorney. One child can be your regular power of attorney while another child can be the medical power of attorney.
Tips on Creating Wills
Blended families should also create wills. Your will should provide the person who will be the guardian of your children should you or both of you pass away. The will should also list which assets will be distributed to your surviving spouse, biological children, and stepchildren. Before you create a will, talk with your spouse and estate planning attorney about how you will write it. You should also get input from your adult children since this will impact their future. Take inventory of all of your assets and then write which assets your spouse and children will receive upon your death.
Avoid Leaving Shared Interests
It’s not always a good idea to leave an asset to both your surviving spouse and adult children from a previous relationship because this may cause problems. If you leave a home to both your surviving spouse and adult children, conflict may arise. The surviving spouse may benefit more from the property than the adult child. The surviving spouse’s adult children from a previous relationship may also want a share of the inheritance, causing more problems.
Remove Former Spouses from Financial Accounts
Even though you remarried, your new spouse won’t receive any assets on your financial accounts if you don’t remove your former spouse as a beneficiary of those accounts. Take this important step now to avoid conflicts between your ex-spouse and current spouse after your death.
What About Child Support?
You should tell your spouse about your child support obligations because it affects your estate planning. Your child support obligations can reduce your disposable income throughout your marriage. If you’re leaving assets to your children to whom you’re paying the child support, it reduces your overall asset inventory.
Consider a Spousal Lifetime Access Trust
This is a neat way to provide for your spouse and here is how it works. It is an irrevocable trust you set up for your spouse and it reduces your tax liability. This is because you can donate cash and other assets as a gift to this account for your spouse, and all funds you donate to the SLAT will not count as part of your taxable estate. Your spouse can access funds in the SLAT account even while you’re alive. You would appoint a person to be the trustee of the SLAT account. You can also add remainder beneficiaries to inherit the funds after your spouse dies.
With these helpful tips and assistance from an estate planning attorney, estate planning for blended families doesn’t have to be overwhelming. You’ll have peace of mind in knowing that your financial affairs are in order.
