By The Wyoming LLC Attorney TeamJun 14, 2022
Estate planning for blended families is essential due to the complexities that arise from multiple spouses and children. Traditional Wills may not suffice. Strategies like trusts, life insurance, and updating retirement account beneficiaries can help ensure assets are distributed as intended.
The term blended family can be used in reference to a number of different family scenarios. For example, it is commonly used to encompass families where one spouse (or both) has a child from a previous marriage.
It can also be used for families whose children have spouses with children of their own from previous marriages, or if the children in a family are in a subsequent marriage and have children from previous marriages.
While it is not so pleasant to think about, the reality is that roughly 50% of marriages will end in divorce. And in the case of remarriages, that percentage ticks even slightly higher. Factors like these make blended families quite common.
As you might imagine, blended families tend to face some complexity in the estate-planning process. When you factor more children and different spouses into the mix, you are likely to run into at least a few difficulties you weren’t expecting at the onset.
For this reason, it is important to specifically plan out your intentions with a blended family estate plan. Failing to put an estate plan into place could strip you of having a say over how your assets are passed on or how property is split among the family. A thoughtfully executed estate plan will not only ensure that your wishes are carried out once you are gone but will also help to minimize any potential conflict that could arise.
When it comes to blended families, simply having a Will in place might not cover all of your bases. Take some time to think through various scenarios that could unfold with your blended family and make sure you have a plan in place that will address them.
For example, say that you created a Will leaving all of your assets to your spouse. Consider the possibility that down the road your spouse could leave your biological children out of his or her estate, choosing instead to leave all assets to their own biological children (or anyone else of their choosing). Or consider the possibility that your spouse will end up remarrying and how that might impact your wishes.
As you consider how you would like your estate dispersed (your wishes, beneficiaries, and more), it can be helpful to understand common estate planning strategies. Implementing the strategy right for you and your wishes will help protect your assets and ensure your plan is executed correctly. Here are some strategies that you might consider:
While a Will can be a valuable estate planning instrument, it may not fully tackle the challenges that can emerge within a blended family.
You could establish a trust that gives your spouse access to assets during their lifetime while stipulating that the balance of the trust is passed on to your children upon your spouse’s passing. Additionally, you could appoint a trustee to oversee the financial decision-making for the trust and assist in settling any disputes that arise.
Life insurance is another option that allows you to disperse your assets to family members in a specific way. For example, you may decide that you want to leave a large portion of your assets to your spouse. But since you want to provide for your children, as well, you decide to purchase a life insurance policy that names your children as beneficiaries.
So, while you pay the premiums for the policy, your children will receive an inheritance upon your passing. In this way, you can ensure that all of your family is taken care of in specific ways that minimize conflict or disagreement.
You may also consider an irrevocable life insurance trust as a way to execute this strategy. In this case, the trustee would purchase the life insurance policy on your life, which names your children as beneficiaries. Upon your passing, the life insurance policy pays the trust (i.e. your children as beneficiaries).
If you have a retirement account, such as a 401(k) or IRA, you have another option at your disposal for passing on inheritance. You might not even recall who is currently designated as the beneficiary of your retirement account from when it was first opened many years ago, but you have the option of updating this information. It is especially important to stay current on this information in the case of a blended family, as an ex-spouse may still be listed as a beneficiary.
Retirement accounts are another method of passing on inheritance in a tailored way, as they are not passed on through Wills. Even if a Will were to state otherwise, the retirement account would be passed on to the primary beneficiary that is named.
Regardless of the wishes you have for your estate, or which strategy you think might work for you, it is best to seek out an attorney to assist with your estate planning, especially in the case of a blended family.
Simply leaving everything to your spouse in a Will might seem like an uncomplicated option. But keep in mind the number of scenarios that could unfold down the road. What was intended as a way of keeping things simple could turn into a mess of disagreement and hurt feelings.
It is always useful to bring in a perspective from outside of the family to offer professional and unbiased advice. Additionally, your attorney can help ensure that your estate plan is both formed and executed properly so that your wishes are accurately carried out.