5 Estate Planning Tips for Blended Families
Divorce and remarriage are common. Blended families bring an extra challenge to estate planning, and it’s important for people to have those difficult conversations with their loved ones if they’re contemplating another marriage.
Here are five tips to help resolve financial concerns in blended families.
Consider a prenuptial agreement
A person becoming part of a blended family can protect his or her goals and financial resources by entering into a prenuptial agreement with their new spouse. While a prenup may not be necessary for couples entering a first marriage, for a second marriage or any more after that there are all sorts of complex issues that may make such an agreement not only useful but necessary.
Before getting hitched, people should discuss estate issues with their new intended spouse. A prenup ensures that both parties enter into the relationship with a clear understanding, to help protect them and their loved ones as well.
We encourage newly married couples to clarify any ground rules up front regarding “yours,” “mine,” and “ours” in order to avoid confusion. It’s important that they each have a good understanding of the new blended family’s finances. Many people will start out having separate accounts, primarily using them to pay for personal expenses, including those for children from a previous marriage.
If they maintain a joint account for ongoing expenses as a couple, it’s important to discuss how much each spouse is going to contribute monthly – an equal amount or a percentage. Since financial circumstances change due to job loss, business ownership or promotions, couples should revisit this arrangement regularly to ensure that it still meets their needs. Keeping up clear, consistent and frank communication about finances truly helps to prevent misunderstandings.
Keep medical documents current
Who gets to make end-of-life decisions? If people don’t put their wishes in writing, their loved ones can be left with legal disputes and family fights at one of the most difficult times in their lives.
For those entering a new marriage, make sure to talk with your future spouse about this issue. Children from a previous marriage may have very different ideas about what should be done in the event of one’s incapacitation than a step- or half-sibling. Without specifying those wishes in a living will, also called an advanced healthcare directive, there can be costly legal battles and anguish for loved ones.
Modify the trust and will
In our experience, the ugliest family disputes that occur after someone passes away are not about money but possessions with sentimental value. Even the smallest item can have a significant emotional value, and squabbles over these belongings can cause rifts that are difficult to heal.
Trusts should be as specific as possible about what each beneficiary is to receive. This will eliminate potential infighting among siblings and between the surviving spouse and children from a previous marriage.
For those who wish to leave assets to stepchildren, it’s important to include those directives in the trust or will. Stepchildren are not generally considered legal heirs, and they won’t inherit anything without being named in these documents.
Estate plans can also become complex when a person wants to provide for his or her surviving spouse and still give the children access to inheritances as soon as possible.
For people with children by a previous marriage, a trust can be a good way to protect their inheritance. It can also be used to help ensure that any previous spouses or step-children who were part of that marriage are not inadvertently disinherited by the new relationship.
Without getting those wishes in writing, people can leave their loved ones unprotected and without financial support unintentionally.
Talk to professionals
Experienced estate planning attorneys understand the unique challenges facing blended families. If you need to discuss the use of trusts or other asset protection strategies, please contact our office. We encourage people to have discussions and to communicate clearly with loved ones about their final goal: a happily blended family that remains a family after the parents have passed.
Finally, marriage should be a time for families to come together and rejoice. Blended families can be strong and supportive environments for everyone. However, a large part of that comes from everyone feeling that they are taken care of when a loved one passes away.