When you have a blended family, there are some special things you need to take into consideration while handling your estate planning. A "traditional family," or traditional marriage, includes two opposite-sex partners and their biological children. If you have any other type of arrangement, including stepchildren, adopted children, or a same-sex marriage, your estate planning process may need some special treatment.
Marital vs. Non-Marital Assets
When you come into a blended family, both partners may have considerable individual assets that they bring to the table. You may both own property or have investment accounts. You may also have considerable personal assets from before the marriage, including an inheritance or life insurance policy from a deceased spouse.
While you may intend for both partners and their children to use those assets for the duration of your marriage, you may want to maintain personal possession of those assets if the marriage comes to an end, or pass them to your individual children in the event of your death. As a result, you may want to have a prenuptial agreement that addresses those concerns. Furthermore, your estate plan may need to clearly lay out items that are not marital assets and that should not pass automatically to one spouse on the death of the other.
Dividing Assets for Your Estate Plan
There are several points that you may want to take into consideration as you divide your assets or set up beneficiaries as part of your estate plan. Often, one spouse will have assets or possessions that they want to ensure will go to their children (and not their spouse or spouse's children) in the event of their death. For example, suppose that Rose was previously married and received a considerable life insurance policy when her husband died. She might want to be sure that the extra funds from that policy go to her children. On the other hand, if she set them aside for the children's future education or earmarked them for a specific purchase (like a house), she may want to ensure that they are protected by a trust, which would make those funds accessible for their intended purpose and streamline the transfer of those funds on her death.
Likewise, Gavin might have inherited his late wife's family property, which was originally owned by her grandfather, when she passed away. He might want to make sure that the property passes directly to his sons, rather than going to his new spouse or being divided equally between the children.
Some partners, however, want to make sure that everyone receives a fair share when they die. They want to become one big happy family, and they treat their spouse's children the same as theirs when it comes time to divide assets and name beneficiaries in key policies.
As a couple, this discussion is an essential one to have upfront. You may have assets that you want to protect to ensure that they are passed down to your kids, whether to follow the wishes of your deceased partner or because of commitments you have made to your children in the past. By discussing it up front and laying it out in your estate plan, you increase the odds that your wishes will be followed.
Revisiting the Conversation
As a blended family, you may need to revisit your estate plan on a regular basis. Things change: your older children may grow up and move out; you and your new spouse may have additional children together; one or both of you may have a significant change in employment that results in considerably changed financial status. Not only that, the way you feel about your assets or your new stepchildren may look very different from the way you feel about things later, after you have spent several years living as a family. Make plans to revisit your estate plan periodically to ensure that it still meets your wishes.
Learn About Your Estate Planning Options
Crafting an effective estate plan for a blended family can be more complex than designing one for a traditional family, but it's well worth the effort. Contact us to learn more about your options for crafting an estate plan that will meet the needs of your family.