Blended Families, Big Decisions

Modern families come in all shapes and sizes – second marriages, stepchildren, unmarried life partners, and chosen families. But with more love comes more complexity, especially when it comes to estate planning. Without a solid plan in place, blended families can face unintended disinheritance, disputes, and financial hardships.

If your family doesn’t fit the traditional mold, you need an estate plan that reflects your unique dynamics and protects everyone you care about. Without careful planning, estate distribution can get messed up in ways you never intended. 

One risk is unintended disinheritance. If you leave everything to your spouse, thinking they will do the “right thing” and provide for your children from a previous relationship – well, think again. Once they inherit, they can legally leave assets to whomever they choose, including their own children, new spouses, or anyone else.

Another potential mishap is a conflict between children and a surviving spouse. If your children and your new spouse both expect to inherit, tensions can run high. Lack of clarity in your estate plan often leads to disputes, and disputes often mean court. Along the same lines, if minor children inherit assets, an ex-spouse could end up managing those funds, even if that’s the last thing you want.

Additionally, you may want to provide for your biological children, stepchildren, and spouse differently. Without clear instructions, your estate could be divided in ways that don’t align with your wishes.

A final concern of note: beneficiary designations. Life insurance policies, retirement accounts, and other beneficiary-designated assets pass outside of a will or trust. If you haven’t updated your beneficiary designations since a divorce or remarriage, your assets may end up with unintended beneficiaries.

So how do we plan for a blended family? It requires a little extra care, to ensure your wishes are honored and your loved ones are protected:

• Consider using a trust instead of a will. A well-structured trust, for example, can allow your spouse to receive income or a specified amount of your assets while ensuring that what remains goes to your children. This protects both parties and helps remove the risk of disinheritance.
• Get specific about who gets what. This includes stepchildren, biological children, and even non-family members who you want to include in your estate.
• Update beneficiary designations to make sure your retirement plans, life insurance, and other payable-on-death accounts align with your current estate plan.
• Name a Trustee or Executor who is going to be fair, and potentially doesn’t have a large stake in your estate. Naming stepchildren, or even your surviving spouse as the person in charge of your plan can create conflicts. A more neutral party can help ensure fair distribution and your wishes are followed.
• Plan for long-term care and Medicaid. If one spouse needs long-term care, assets can be depleted quickly, leaving little for the surviving spouse or children. Proper Medicaid planning, using an asset protection trust, can help.

Most of all, it is important to remember to have these honest conversations. Blended family estate planning is as much about communication as it is about legal documents. Setting clear expectations with your spouse and children can prevent future disputes.

No two families are the same, which means estate planning shouldn’t be one-size-fits-all. A well-crafted plan can provide financial security, prevent conflicts, and ensure that your wishes are carried out.