Today, blended families are more common than ever, with step-family members, half-siblings, former spouses, new spouses and every combination of parents, children and partners imaginable. We often think of families with young children, but blended families are not limited to one particular age demographic. With increasing life expectancies, “gray divorce” is on the rise, and many more seniors re-marry, even into their 90’s.
Blended Family Reality
When a couple marries after their separate children are already adults, the new spouse is often thought of as the parent’s spouse, rather than a step-parent. When relationships between spouses and step-children are distant or rocky, estate planning should consider that those relationships may dissolve upon the death of the biological parent The News-Enterprise reports in their article “In Blended Families, Estate Planning Can Have Unintended Issues“.
With blended families, traditional estate planning such as wills and non-probate tools like transfer on death (TOD) documents may not be sufficient to meet their unique and complicated needs, advises a recent article titled “Legal-Ease: Hers, his and ours—blended family estate planning” from limaohio.com.
The Limitations of Traditional Estate Planning
Many couples, even those with children from prior marriages, rely on “mirror wills”, leaving all of their assets to their surviving spouse. This approach often leads to unintended consequences for the children from the deceased spouse’s previous marriage.
For example: Jack has two children from his first marriage and Diane has a daughter from a previous relationship. They marry and have two children of their own. Their wills stipulate they’ll leave each other everything when the first spouse dies. It sounds practical enough, but in this situation, the children from the first spouse to die are at risk of being disinherited, unless plans were made for them to inherit from their biological parent.
Even if the deceased spouse had a will leaving everything to his or her own children, all assets jointly owned with the surviving spouse with “right of survivorship” will pass automatically to the surviving spouse.
The Power of Trusts in Blended Family Estate Planning
Modern blended families benefit from the use of trusts, which are designed to protect each spouse, their children, and any child or children they have together. By appointing a trustee to administer the trust, the surviving spouse is legally bound to fulfill the wishes of the deceased spouse, so that all children are provided for.
Choosing the Right Trust for Your Situation
An experienced estate planning attorney can guide blended families in selecting the appropriate trust for their specific needs. There are several types of trusts that can safeguard the interests of children and surviving spouses alike. Ensuring that assets are distributed deliberately can prevent conflicts and potential litigation among family members.
Planning in Case of Incapacity
Incapacity planning in a blended family requires careful consideration of roles and responsibilities. Assigning decision-making authority to the right person based on their skills and availability is crucial. This should involve naming an Agent to make health care and financial decisions, and appointing a trustee for a revocable living trust.
All adult children need to know who has been chosen for which roles, and what their responsibilities will entail. Appointing successors for each of these roles is a smart and practical move. Communicating these roles and expectations to all family members, including step-children, can help prevent disputes during difficult times.
Managing Expectations for Inheritance
To protect the interests of all children, trusts can be structured to distribute wealth deliberately. One approach is to establish a trust for the surviving spouse, with assets passing to the stepchildren upon the second spouse’s passing. This strategy safeguards the assets for the biological children of the first spouse and helps avoid conflicts over inheritances.
It’s important to be open about the likelihood of an inheritance and what that may entail. Most adult children would rather their parents enjoy their retirement, and take care of their own needs, rather than skimping, or doing without so the children have an inheritance.
Conflict can also be reduced if heirs understand that inheritances may not be equal. Perhaps one child will inherit the family home, and another will receive the life insurance benefits. It is wise to avoid surprises. If one family member left the workforce to provide care to a parent, it might make sense for that person to receive a larger inheritance to offset the lost wages.
Family Meetings with Professional Advisors
Family meetings that include all parents and step-siblings should be scheduled to discuss important matters, including incapacity planning, finances, end-of-life wishes, and funeral arrangements. The transparent communication and setting clear expectations can prevent surprises and foster a sense of unity within the blended family.
Meetings should be scheduled with professionals such as the financial advisor, estate planning attorney, and primary physician as needed.
Estate Planning Mistakes to Avoid
A recent article from AARP titled “Remarried With Children? 5 Estate Planning Mistakes to Avoid” provides these guidelines for Blended Families:
- Update Beneficiary Designations. This includes financial accounts, life insurance, and retirement plans.
- Update your wills. Both you and your spouse should update your wills, and consider Trust planning. The right changes will depend on the size of your family, the ages of your children, the relationships among family members, and other factors unique to your situation.
- Don’t automatically treat all heirs equally. If one spouse came to the marriage with significantly more assets than another, proper planning can ensure those assets will remain in the bloodline. If one person owned the home, for example, they may want to ensure that only their children inherit the proceeds of the sale of the home after they pass away. The homeowner may set up a trust, allowing their spouse to remain in the home until their death, at which time the home would be sold and proceeds split between the children.
- Update Advance Directives. Powers of Attorney for Healthcare and for Financial matters should be updated anytime there is a change in marital status. These documents should show the current legal names of all parties so medical and financial institutions don’t have a reason to reject the documents. It is also important to have open discussions about your wishes with your family members.
- Don’t do it yourself. Blended families are complicated, and your estate planning will be complicated. Don’t try to create your own estate plan without a current and thorough knowledge of the law. An experienced Elder Law Estate Planning attorney can help.
Distributing Personal Items to Prevent Family Conflicts
Sentimental items can be points of contention among family members after a loved one’s passing. To avoid conflicts, a written memorandum detailing the distribution of tangible personal property can be included in the last will. Items can also be distributed prior to death, ensuring there are no misunderstandings. Gifting personal items can allow someone to witness that gift being enjoyed by their loved ones.
Conclusion
Estate planning for blended families demands a more complex approach than traditional family arrangements. By using carefully drafted trusts, clarifying roles, managing expectations, and fostering open communication, blended families can create comprehensive estate plans that protect each family member’s interests. Working with an experienced estate planning attorney is essential in navigating the intricacies of blended family dynamics and securing a prosperous future for all.
Contact our office today.
References:
AARP (July 9, 2021) “Remarried With Children? 5 Estate Planning Mistakes to Avoid”
The News Register (Dec. 7, 2021 ) “In Blended Families, Estate Planning Can Have Unintended Issues”
limaohio.com (Aug. 20, 2022) “Legal-Ease: Hers, his and ours—blended family estate planning”
