Estate Planning for the Blended Family

In a first marriage most, if not all of the assets are held jointly and the couple often has the same estate planning goals.  But planning for a blended family is different. There may be his children, her children and sometimes their children. The spouses often have separate assets they brought into the marriage.  While they often want to care for the surviving spouse while he or she is alive, they generally want their assets to go to their own children after they die.In blended families, estate planning methods relied upon in a first marriage can actually undermine planning objectives. For example, husband adds his new wife on the title of his home and they own it as joint tenants with right of survivorship, if he dies first his wife will have complete ownership of his home. She can now do whatever she wants with it, regardless of what his will or trust may say. She can leave it to her own children and completely disinherit his.  Similar problems exist with beneficiary designations on life insurance, IRAs or other tax-deferred retirement plans.If you are part of a blended family the following should be considered as part of your estate planning:

  • A pre- or post-nuptial agreement is an absolute necessity.  Absent this agreement whatever planning you do is subject to future statutory claims by the surviving spouse.
  • Consider establishing a trust that provides for the surviving spouse during his/her life, but locks in your beneficiaries upon your death.  This type of planning can also provide protection in the event your spouse remarries.
  • Naming a properly drafted trust as the beneficiary for life insurance policies and tax-deferred plans is often a good choice for second marriages. This will allow the owner-spouse to keep control over how and to whom the proceeds are distributed. The surviving spouse can receive lifetime income, yet the owner-spouse can keep control (through the trust) over the rest of the proceeds. Keeping the proceeds in a trust will also protect them from irresponsible spending, creditors, predators, divorce, remarriage and even estate taxes, if done properly.
  • Consider planning for disability and long-term care. If one spouse becomes ill and Medicaid assistance is needed, the combined assets of the couple will be considered “available assets” to pay for the care of the ill spouse. Long-term care insurance may be needed to protect the assets of one or both spouses.

If you and your spouse are part of a blended family the need for well thought out estate planning is vital.  If you would like to learn more about estate planning for blended families please contact our office for a consultation.