20 Jul Estate Planning For Blended Families
These days, many more marriages will end in divorce than just a few years ago. The present rate is estimated to be between 40-50%. The divorce rate for subsequent marriages is even higher. For those entering a marriage that brings children from a previous marriage, there will need to be serious emotional, practical, and financial considerations before tying the knot again. At Phelps LaClair, we recognize that blended families present a challenging set of circumstances. Here are some things to consider when it comes to estate planning for blended families:
No estate plan
In the event of the death of one spouse, if there is no estate plan in place, then by law, all assets shared by the couple will go to the surviving spouse. This would include all real estate, motor vehicles, boats, bank accounts and all personal items brought into the marriage, regardless of whether they were the property of the deceased spouse prior to the marriage. The surviving spouse can then do whatever he or she wants with these assets—including writing a will or setting up an estate plan that leaves everything to the living spouse’s own children and none to the children of the deceased spouse. While not necessarily fair, it is legal.
A simple estate plan
A typical simple estate plan is designed around a traditional nuclear family. If there is a living trust, then the surviving spouse becomes the trustee. This spouse has the legal right to amend the trust. We want to believe the best of our spouses, but life can have many unforeseen situations that affect a person’s decisions. The surviving spouse could legally amend the trust to benefit his or her own children, and effectively disinherit the children of the deceased spouse when the surviving spouse passes away. Again, in cases like this, this is probably not what the grantors desire when they make an estate plan, but it will hold up in court against the challenges of the disinherited children.
Even if you have an estate plan, the distribution of insurance and retirement plans goes to the designated beneficiaries named in the plan. If you want your new family to receive these benefits, you need to change the beneficiary designation forms on file to include them. Without this, they will not be able to receive any distributions from these assets.
If your blended family includes older children, it is important that they understand what your desires are for end-of-life care, long-term care, and asset distribution. There may be personal items that have special meaning to certain beneficiaries, so it is important to have a family discussion in order to avoid conflict when one spouse passes away. The children need to know that the surviving spouse will become the trustee of the estate, and the children need to express their desires while both parents are alive. Including them in the discussion will go a long way toward keeping the peace down the road.
Let Phelps LaClair help you!
Phelps LaClair, serving Chandler, Mesa, Phoenix, and Scottsdale, has decades of experience with custom estate planning for blended families. Using several different kinds of trusts and living wills, we can design a plan that fits your family, both now and in the future, protecting your assets and interests and giving you peace of mind. Give us a call for a free, no obligation consultation. We love working with families, and we hope to work with yours! Call us today.