Nontraditional families (which include “blended” families—those with stepparent or stepchildren relationships) now outnumber traditional families in the U.S. and most European countries. Even the British royal family is blended! However, despite the prevalence of blended families today, the law has not caught up to the changing family dynamics. This leaves us with the responsibility to ensure our estate plan reflects our family dynamic and wishes.
Estate planning, therefore, becomes especially important for those with blended families. The issues surrounding how your assets are distributed become complicated, and the result may be different than what you intended if you don’t plan. Ignoring them may result in estate litigation, costly estate administration, and higher taxes. If you have a blended family, we strongly advise you to consult with an experienced estate planning attorney to address all of your concerns and talk about your legacy. We can suggest solutions you may not have considered so you can complete your estate plan conflict-free and with peace of mind.
What If I Don’t Plan My Estate?
If you die without a will, living trust, or another type of estate planning document, and haven’t designated a beneficiary, your assets will pass by intestacy. Intestacy means that state law will govern who inherits your assets and how those assets will be distributed. This may be different from how you intend for your property to pass. If this is the case, you should consider the advantages of creating an estate plan.
How A Will Fits Into a Blended Family Estate Plan
Um, it mostly doesn’t. If you have a “simple will” leaving everything to your surviving spouse and you die first, the survivor can do whatever they want to with the assets you gave them. So, they can remarry (and give things to their newly beloved) or decide they don’t want to leave things to your beneficiaries and “poof” just like that your children, other family, charities, etc. can be left out in the cold. This doesn’t mean wills are bad, they just don’t have the ability to adequately protect from these potential scenarios. Trusts are much better tools to ensure the second in line (the people you want to have receive assets at your spouse’s death) actually get them.
How a Trust Fits Into a Blended Family Estate Plan
Trust agreements (a document created during your lifetime) govern how assets are held and used for the benefit of beneficiaries. This legally binding agreement goes into effect after you pass and ensures that your children or other beneficiaries are well taken care of, even when you’re not here to direct where your assets go. Your surviving spouse can be provided for too, but rather than just handing over the assets trust agreements can limit the direct access and control of the surviving spouse, add contingencies like less access in the event of remarriage, etc.
However, establishing a trust is only the first step. You will also need to appoint a trustee (a representative in charge of your estate) to act in your family’s best interests and carry out your wishes regarding the trusts you establish. Choosing the wrong trustee can give rise to disasters such as disputes between family members, probate challenges, and asset mismanagement.
To avoid this, you’ll want to think hard about who you choose as your trustee: preferably someone who is trustworthy, responsible, and impartial. For example, instead of a family member, consider appointing a professional trustee (often, this is performed by a financial institution) or an accountant with no relations to family or conflicts of interest. With a neutral third-party it is more likely that assets pass in the way you intend and not to a new spouse or surviving spouse’s own children.
Review Beneficiaries on Accounts
It’s also important to keep in mind that you may have to update beneficiary designations on accounts you hold: retirement accounts, brokerage accounts, life insurance policies, and so on. Often, this means removing your spouse in favor of your trust. Why? Well, the terms of a trust agreement (or will for that matter) do not trump beneficiary designations. Stated differently, if you leave everything by beneficiary designation to a spouse it doesn’t matter what your trust agreement says; your spouse becomes the owner at your death and can do whatever they would like with the funds you left them.
Let Us Help Create An Estate Plan for Your Blended Family
Estate planning is necessary for every family, but it is particularly critical for blended families. By partnering with an experienced estate planning attorney, you’ll be equipped to face these unique and complex challenges to preserve your legacy and protect your loved ones.
To learn more, attend one of Promise Law’s free estate planning workshops. These workshops provide a great foundation of information that everyone needs to make sound planning decisions. Moreover, if you attend a workshop, you also get a complimentary one-on-one consultation with an estate planning attorney.