Estate Planning for Blended Families
by A. Scott White, CFP®, ChFC, CLU
A blended family is one where at least one spouse has at least one child from a prior marriage or relationship. According to the U.S. Census Bureau, blended families now outnumber traditional families.1 With today’s divorce rates and longer life spans, many more people are blending families. The biggest estate planning concern in blended families is ensuring that each spouse’s share of the estate goes to his or her desired beneficiary—that the children’s inheritance is protected even if their parent is the first spouse to die. In traditional estate planning, when the spouse dies, the estate is distributed to the surviving spouse and then to the children. But in blended families, after the first spouse dies, a surviving spouse can easily amend the documents to reflect his or her wishes—leaving out the deceased spouse’s children if the surviving spouse chooses.
All families need solid estate plans, but the risks for blended families without estate plans are many. For example:
• A spouse dies and leaves her estate to her new husband. When he dies, he leaves the assets to his children, not to hers.
• One child inherits the family home, even though the home was promised to another child.
• An ex-spouse inherits the former spouse’s retirement assets, even though the former spouse has willed them to his children.
While estate planning must be done on a case-by-case basis, for a blended family planning can be more complicated. A solid estate plan can help you put a plan in place that directs your assets to the people you choose. If you are considering a marriage that will result in a blended family, here are some questions to ask yourself now:
• What do you want to happen to your assets when you die?
• Who will provide for your children?
• Who do you want to make decisions for you, if you can’t make them for yourself?
• Who will take over as guardian for any minors when you die—your surviving spouse or the children’s natural parent?
• What will you leave to your surviving spouse?
• How do you want to provide for them?
• Do you want to give them broad decision-making authority or would you rather limit it?
• Do you and your present and/or former spouse have shared objectives?
• Will you need two separate attorneys to handle your plans?
• Do you live in a separate or community property state?
A prenuptial agreement can be a good way for parents who are remarrying to specify which of their assets they’d like to earmark for their children. For example, a prenuptial agreement can help couples designate college savings they each have put aside for the children from their first marriage. A postnuptial agreement, signed after the couple has taken their vows, is less common but could work the same way. In some states prenuptial agreements, as well as postnuptial agreements, are not valid, and a judge could ignore or invalidate the agreement.
Estate planning is a complex area, with significant tax, legal, and economic implications. Please contact me if you have questions regarding your specific situation.
1 U.S. Bureau of the Census
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