Blended families have become more prevalent in our society, and thus in the world of estate planning. It is likely that a couple sitting in the initial estate planning consultation is in a second or even a third marriage. Planning is critical, especially for blended families, to address the wishes of both spouses.
To ensure the plan is acceptable to both parties, good, open, and honest communication is necessary. Blended family situations may not naturally align with everyone’s wishes. For example, if each person has children from prior relationships, traditional provisions for spouses and children may not work.
Areas for conversation include providing for spouses, providing for children, final provisions for remains, avoiding assets coming under control of someone other than their spouse and/or children, adhering to a divorce or separation agreement designating certain assets to the ex-spouse, estate taxes and depletion of assets for their long term care if needed.
The next step should be discussing family goals and concerns as a family unit. They may look very different from the individual goals, which is where the challenge in blended family estate planning happens. Some of the concerns might be financial. Maybe not everyone needs to be treated equally. Maybe there are concerns about disputes among loved ones. Perhaps there are concerns about a new spouse if their spouse survived them and remarried. What would happen to the children?
Good estate planning will address many of these goals and concerns. A trust that has lifetime provisions for a spouse, that subsequently passes assets to the children of the individual establishing the trust, is a smooth and efficient way to ensure the beneficiaries are protected upon death. The trust can also designate family property and heirlooms passing along to the specific beneficiaries so those items stay “in the family”.
Selecting individuals to act as the personal representative, trustee, and power of attorney is extremely important in the estate planning process. These individuals will act on behalf of the deceased and in helping to settle an estate. Family dynamics, as well as competence, should be considered when selecting fiduciaries. It may be necessary for those selected to help calm family disagreements should they arise.
Letters of instruction may be helpful in explaining the deceased’s last wishes in the estate planning documentation. They provide the opportunity to ensure wishes are carried out versus the wishes of a spouse or other family member reducing the stress on the family by not having to make those decisions and providing an opportunity for leaving personal notes to the deceased’s loved ones.
One commonly overlooked item in estate planning is updating beneficiary designations on assets. Beneficiary designations will likely override a Last Will and Testament regardless of the family dynamics. You probably do not want your life insurance policy payout going to your ex-spouse because you forgot to update the policy making your current spouse the beneficiary. This holds true for brokerage accounts, IRAs, 401k’s and any other investment with a PoD (Pay on Death) designation. Make sure your asset beneficiaries are current!
For more information or a consultation, please call us. We can help make sure your last wishes become your last results.
Author: Erika Erlenbach, Attorney
The McIntosh Law Firm, P.C.