Estate planning for blended families can be more complicated than for traditional families due to the unique dynamics and potential for conflicts among step-relatives. We have all heard of situations where one spouse dies in a second marriage and there are biological children involved from the first marriage or relationship. They may be unsure about who is supposed to be getting the parent’s remaining assets.
If not planned carefully, the distribution of assets can lead to disputes and unintended consequences. The goal of an estate plan is to proactively figure out the potential problems that could arise and come up with solutions while both spouses are still alive. Death and funerals are difficult enough to go through without the jealousy and fighting over assets that can occur if plans have not been made carefully.
Considerations And Strategies For Blended Families
- Open Communication: It is important to speak openly with all family members, including children from previous relationships, about your estate planning intentions. This can help prevent surprises and misunderstandings after you have died.
- Wills and Trusts: A will is essential, but blended families might also consider setting up a trust. Trusts can allow for greater control over asset distribution.
- Revocable Living Trusts: These can be changed during your lifetime and allow you to specify how assets will be divided upon death.
- QTIP Trust (Qualified Terminable Interest Property Trust): This type of trust allows one spouse to provide for the other, while also ensuring that the remaining assets (known as “the remainder” go to specific beneficiaries (for example, children from a previous marriage) after the surviving spouse passes away. The QTIP Trust can also be advantageous for federal estate tax planning purposes depending on specific client circumstances.
- Life Insurance: A life insurance policy can be used to provide for children from a previous relationship or to ensure that all of the children involved in the blended family receive an equitable distribution of assets.
- Designation of Beneficiaries: Keep beneficiary designations updated on retirement accounts, life insurance policies, and other investment and financial products. Remember that these designations supersede any instructions in a will or trust. Additionally, removing your spouse as a beneficiary on a retirement plan may require a waiver from the spouse.
- Guardianship: If there are minor children involved, it is crucial to determine who will care for them in the unfortunate event that both parents pass away.
- Durable Power of Attorney: This document allows someone to act on your behalf if you become incapacitated. Make sure that you appoint an individual as your power of attorney whom you trust and who understands the dynamics of your blended family.
- Healthcare Power of Attorney: This designates someone to make medical decisions on your behalf if you are unable to.
- Family Cottage or Vacation Home: If you own a family cottage or vacation home, you might want to consider creating a separate trust or agreement outlining its use and maintenance. This can help prevent conflicts among heirs who want to enjoy the property after you die.
- Equal vs. Equitable: Understand the difference between treating children equally and equitably. For some families, an even split might make sense, while for others, different circumstances might warrant different distributions.
- Update Regularly: Your estate plan should change as your family situations change. You should regularly review and update your documents to ensure they reflect your current wishes and circumstances.
- Professional Advice: Given the complexities involved when trying to design your estate plan, it’s a good idea to work with an experienced estate planning attorney, especially one who is familiar with the challenges of blended family estate planning.
Are You a Blended Family in Need of Estate Planning Assistance? Contact Berkley Oliver Today
Although proactive estate planning is important for everyone, it can be especially useful when you are dealing with various competing interests that might exist in a blended family situation. Contact Berkley Oliver if you are in Shelby County, Spencer County, or throughout Central Kentucky and would like our firm to help you devise an estate plan. The goal is to make a plan that ensures that your wishes are honored in the event something happens to you and also makes sure that your loved ones have been taken care of.