Estate planning is important for any family – after all, who wants to argue with their family members about what mom’s intentions were for the house at her funeral?
The need for estate planning in blended families is even greater because there are more people in your life who can make a legal claim on your property after you pass. You are a member of a blended family if you are remarried and either you or your spouse has children from a previous marriage.
As the average life expectancy grows, more and more people remarry in their later years. This increases the number of blended families around the country. Each time you make a major relationship change like this, you should discuss your current plan with your attorney.
Here is a checklist of items you should discuss with your new spouse and your estate planning attorney.
Who Gets the House?
If you owned a house before your new marriage, will your new spouse move in with you? Will their name be on the deed? If you die, do you want your surviving spouse to continue living there? Do you own other property, such as a farm that’s been in your family for generations that you consider your children’s birthright?
Talk to your estate planning attorney about different legal tools you can put into place to ensure that your intentions with your property are carried out.
One of these tools may be right for your situation:
- Getting a prenuptial agreement on paper before you sign the marriage certificate. Having this agreement in place is a smart legal move. It can save countless hours and thousands of dollars if you and your spouse end up being one of the 50% of marriages that fail.
- Giving your spouse a life estate in the home, allows the survivor to live on the property for the rest of their life. The home will then pass to your descendants. Talk to your attorney about imposing requirements, such as an obligation to maintain the home and pay taxes.
- Putting property ownership in a trust can protect it from creditors and ensure that the people you want to benefit from the property can. A trust can help you avoid probate and estate taxes that can otherwise delay receipt of property ownership. A trust can be structured to provide for your surviving spouse for the rest of your life. The remainder of the trust can be distributed as you wish among your children and grandchildren.
- Setting up a Limited Liability Company (LLC) or Family Limited Partnership (FLP) for your property is another way to ensure that property remains in your family and avoid probate fees and estate taxes.
Providing for Your Children with a Former Spouse or Partner
Trusts are also excellent legal vehicles to set your children up for success, especially if you have strained relationships with a former partner. A trust can be set up to provide funds for these children, including for college or buying a home, in a way that is legally protected from spendthrift parents and creditors. It is a good safety net that will ensure your children are provided for, even if you can’t be part of their everyday life.
How and What Each Spouse’s Child Will Inherit
Do you have any heirloom jewelry you want your children to inherit? What about your father’s watch? It’s not enough to assume that these items will go to the intended person. If you remarry, your spouse will be able to make certain claims against your personal property that you own. This could make it difficult for children of the deceased to claim what you may otherwise consider their birthright.
Retirement Accounts and Beneficiaries
People often list their spouses or children as beneficiaries of retirement accounts or other savings plans like IRAs and then forget about updating their accounts. If you are entering a new marriage or leaving an old one, you should take another look at these accounts. Some people want to keep their ex as a beneficiary for one reason or another, but others would prefer their money go to people who are still in their lives.
The same goes for any life insurance policies or health care plans you have. You should keep updated copies of these documents in a safe place so they are easy to locate when the time comes.
End of Life Care
In a similar vein, it’s always important to have a plan in place for if you become unable to make your own financial and health decisions. You should also know who will be the executor of your will after you pass.
Discuss your intentions with your spouse and your children. You should also put into place financial and medical power of attorney documents that are on file with your attorney and primary health care provider.
These documents will allow you to designate one or more people as your legal representative(s). They will have the authority to make decisions about your bank and retirement accounts as well as your property, and be able to give consent to medical procedures.
The executor of your will is responsible for carrying out your estate planning wishes. Is this a job you want to fall to your new spouse, or do you want responsibility to fall to one of your siblings or perhaps one of your adult children?
Thinking about death and divorce is never fun. However, having a plan in place for your family is a smart move. You can save your family thousands of dollars in taxes and legal fees and significantly reduce heartache in a difficult time.
At the end of the day, the only right answer of what is best for your blended family is what you think is best. An experienced estate planning attorney can help you know which decisions to make and will ask the right questions.
To discuss your blended family’s estate planning needs, contact me to set up an appointment.