The bustling and joy a blended family can bring to a home is immense. It is important to ensure that every new family member is properly cared for if anything tragic happens. A great way to ensure protection for each child in your family is to consider estate planning for blended families, both biological and through marriage. Through the estate planning process, you will carefully plan each inheritance, nominate guardians, and choose an executor.
Depending on individual circumstances, the process of estate planning for blended families can be complicated, but that makes it even more important to get it done. You can avoid legal issues down the road and help avoid probate court by building a concrete plan. You should begin the process by discussing with your spouse their wishes for your blended family. After having this discussion, the dedicated team at The Germany Law Firm can help you draft the correct documents. Read on to learn more about the estate planning process for blended families.
Estate planning for blended families is not necessarily much different other than that there are more family members to consider in the process. Due to this, a deeper discussion between you and your new spouse should take place to account for each child from previous and current marriages. Parents will want to consider sibling relationships and what will fit best for each child.
It is common for spouses to leave all of their assets to their spouses, but this can create complications when children are from a previous marriage. Blended families should consider creating a trust that will ensure each child will receive their inheritance in situations where one spouse dies before the other. This puts safeguards in place to avoid disagreements and potential unfair treatment down the road.
Blended families typically refer to married couples with children from previous relationships or marriages. A blended family can include families with half siblings or stepchildren, extended family members living in or outside the same home, and more. Blended family structures have become increasingly common in the United States,with over 16 percent of children living in a blended family setting.
The best option for estate planning for blended families is when spouses consider each family relationship in their planning process. Blended family structures can have major concerns about fairness, naming an executor, and inheritance size. Difficulties can arise when discussing these estate plan concerns, but it is important to address them early on. The following discusses the most common blended family estate planning options:
A marital trust allows both spouses to create a plan that will include all children of the blended family. This structure allows assets to be passed to a surviving spouse while also earmarking remaining residual assets for all children after the death of that spouse.
Family trusts are an excellent option for families with young children and grandchildren. Upon the first spouse’s death, a testamentary trust sees that all assets enter a combined trust. This structure allows the surviving parent to make a determination on the appropriate distribution of assets based on the needs of each child.
This option does not involve trusts but leaves assets to the children of a blended family listed in your will. These conversations may be uncomfortable and sensitive to have with your spouse, but in situations where you want a specific child to inherit items whether they are sentimental or monetary in value, this can be the best choice.
This is another option that does not involve dividing assets through a trust. This structure has all assets transferred to the surviving spouse without having a trust for any children. This estate planning is relatively simple in structure, however, each spouse must trust that the other spouse will plan properly for the children.
It can be near impossible to guarantee every person in a blended family will be content with the financial arrangements you have made during a second marriage. There are, however, some big mistakes you can avoid making to ensure your current spouse and children do not miss out on an intended inheritance.
Many people forget to change their beneficiary designations or wills after a divorce or upon a new marriage. It is important that your money go directly to the person you intend it to go to, often your surviving spouse, without dealing with the legal process of settling an estate known as probate. All financial accounts, including retirement, checking, and savings, should be updated to the proper beneficiary.
While updating important documents, be sure to update legal directives, such as your medical power of attorney, to make sure one of your children or your current spouse is in charge of making any medical decisions in case you become incapacitated.
Financial documents for a 401(k) should be updated with new beneficiary information so that your ex-spouse does not receive all the funds. The rest of your assets are listed in a will, and it is crucial that you update it upon a second marriage.
Generally, people in their second marriage choose to leave the surviving spouse with all the assets, and then, upon the death of the second spouse, all remaining assets are divided evenly among the blended family of children. This works great unless, upon your death, the surviving spouse decides to write a new will shutting out your children.
Entering a marriage typically means spouses are not financial equals, and this can be especially true for second marriages. For instance, if your new spouse moves into the home you owned before the marriage, you may want the proceeds of the house (upon selling after death) to go to your children rather than to go to your spouse and their children.
It is important to discuss how children will receive their inheritance. Children do not need to be given equal amounts. If a child is disabled either physically or mentally, you want to ensure that child is properly cared for after your passing.
Additionally, if another child has a gambling problem, you are not required to give them any money that will be squandered. You will need to appoint an executor to manage the assets listed in your trust.
If you plan to leave your children money upon your death, you should consider letting them have it before your death so that you can enjoy seeing them use the money while you are still around.
You are able to give $15,000 or less per person, not have to pay a federal gift tax, and can avoid involvement by the IRS. It is an enormous tax break for you, and recipients generally do not pay tax on gifts.
If you do not have a lot of assets and uncomplicated circumstances, you could probably go online and draft a do-it-yourself will. This is an inexpensive and straightforward option.
If you are in your second marriage, it is very possible your life is anything but uncomplicated. Blended families, expenses, and commingled assets can create complexities, as does an aging parent or a child with special needs. It is a wise idea to hire legal counsel to help you develop a thorough estate plan.
Blended families can be a rewarding and exciting part of life as long as you ensure each family member is taken care of legally. Our understanding and dedicated attorneys with The Germany Law Firm can help you plan the future needs of your blended family. Contact us today via our online contact form to begin your estate planning process.