Estate planning has become a lot more challenging in more recent years. As the divorce rate has increased, so has the amount of second (and third) marriages. This brings about a number of dynamics with what is known as the modern "blended" family. This involves children from prior marriages or relationships, which can bring about a number of challenging and difficult decisions to be made during the estate planning process.
Because of the challenges that come from the dynamics of the modern, blended families, estate planning is not nearly so straightforward. There are a number of considerations that should be made with those with blended families. Here are just a few.
Not Having an Estate Plan in Place
In the event that there's no estate plan of any kind (Will or Living Trust) in place, then by default, all of the assets will go to the surviving spouse. This could be the home, bank accounts, cars, and other property and assets. Once it's passed along to the surviving spouse, that surviving spouse is free to do whatever he or she wants with these assets. He or she could set up an estate plan and decide who will inherit these assets when they pass away, which can also potentially eliminate any children from a prior marriage belonging to the first spouse to die. Therefore, it is important that if you have a blended family, you take the time to work closely with a qualified estate planner to discuss all of the potential options available and that make sense for your family.
The Typical, Straightforward Estate Plan
Even if you have an estate plan in place, the typical estate plan is pretty straightforward. The surviving spouse takes over as Trustee of a Living Trust and has the power to amend a joint trust made with the first-spouse-to-die. Again, this means that any children from a prior marriage, belonging to the first-spouse-to-die, could be disinherited and receive nothing upon the passing of the surviving spouse. While many married couples might like to believe that their spouse will do what's "right", there's a lot of things that can happen following the passing of one of the spouses.
Don't Forget About Those Beneficiary Designations!
Additionally, whether you have an estate plan in place or not, beneficiary designation forms for certain assets-such as life insurance and retirement plans-are governed by the beneficiary designation forms on file. This means that you could have had the intention that your new spouse and family receive these assets, but if you haven't updated or changed your beneficiary designation forms on file with these financial institutions, whomever you named previously (perhaps an ex-wife or ex-husband) may stand to receive those assets.
The Potential of World War 3!
Even if your family dynamic is great now, things could change after you pass away. Any surviving children from a prior marriage may have expected to have some say so to your burial plans, personal belongings of yours, or even thought they may inherit something when you pass away. Now knowing that these things may be in the control of the surviving spouse, it can lead to a world of conflict and drama in your family. (Believe us, we've seen our share of these situations on a regular basis!)
Get Peace of Mind NOW, While You're Living
Rather than leave the potential care and well-being of your children from a prior marriage, as well as the pressure and hassle of managing what may come to your surviving spouse, you can get the peace of mind right now, while you're living, by making sure you take the proper steps to get your estate and affairs in order right now. There are a number of ways that this can be done. From setting up separate trusts, putting additional trustees in place to take over when the time comes, giving your children a bequest upon your death, utilizing life insurance and retirement account assets to offset other Living Trust assets that may go to your surviving spouse, etc. There's many options and all should be weighed and discussed with an experienced, licensed estate planner that knows what options make the most sense for your situation.
Last, But Not Least...
Last, but certainly not least, if it's appropriate and your children are of age, consider either having a conversation or leaving a letter to explain your decisions and wishes. This can be about your desire for burial or funerals. This can be about what you want for your surviving spouse and your children (either from a prior and/or with your current spouse). You don't have to get specific about amounts or anything like that. But, just explaining how you want things set up and how they will work can help alleviate the potential drama and conflict that may arise after you pass away.
Do you have a modern, blended family? If so, we welcome you attend one of our upcoming free Living Trust Seminars to learn more about the Law Firm of Kavesh, Minor & Otis. We have been servicing the estate planning needs and helping clients with all kinds of blended family dynamics for over 37 years. Keep in mind, even if you already have an estate plan, it should be reviewed and updated regularly. If you attend one of our seminars, at the conclusion of the seminar, all attendees will be offered a free consultation to come in and meet with an attorney. You can register to attend one of our seminars online or contact our main office at 1-800-756-5596. If you are unable to attend an upcoming seminar, please feel free to join our e-mail list and we will be sure to e-mail you of future seminar dates.