Blended families or non-traditional families are the ones in which at least one of the spouses has children from previous marriages. These type of families are outnumbering the traditional number of families due to divorce and remarriage etc. and this number tends to grow as the number of remarriages have been increasing too. While second marriage brings excitement and happiness, it also brings a lot of challenges along with it. Apart from emotional challenges, estate planning is one of the major challenges you can face especially if either of you or both have children from your previous marriage and together as well.
It might be the possibility that you both have separate assets, you both are financially independent or one of you is dependent on others, hence to avoid the complexity it is better to advance plan your estates. Now, if you both are financially independent then you are free to leave your assets for your heirs but if one spouse is dependent then the assets are required for the other spouse along with the children.
If you will not plan your property, then after your demise it could create a lot of problems for them, which definitely is not what you want. Hence, appropriate and timely estate planning can help you to avoid legal and emotional issues that your family can face later. We have summarized some important aspects as mentioned below that you must ensure while planning the estates in case you have a blended family.
Estate Planning for Blended Families
1. Prenuptial agreement:
Parents who are going to remarriage, it is advised to sign a prenup agreement to differentiate the marital and separate property. In such cases, you may even designate future property to be inherited by you, to your children from the first marriage. In case you haven’t signed a prenup before your marriage, then you can sign a postnuptial agreement through which you can address such issues.
Trusts are very beneficial to blended families. The trusts can be designed in such a way that assets of both spouses can be kept separately while ensuring income for the surviving spouse and assets for the children from that or the previous marriage. Qualified terminable interest property trusts or QTIPS are frequently used to capture these benefits.
Another way is to use two separate trusts for your partner and children from previous marriage if you think there would be conflict over the investment in the trust. Also, it is advised to always make a third party trustee for your trust who should be trustworthy and would serve as a professional trustee without having a direct stake. If you want it to make personal, you can make him/her share the duties with a family member to be assured.
3. Life Insurance:
Life insurance is a tool through which you can designate the assets to a specific beneficiary besides the provision of the prenuptial agreement, a will or a trust. In this way, you can either designate the previous marriage children as beneficiaries while leaving other assets for the current spouse and children.
4. Beneficiary information in wills:
If you already have a will and you are entering into a new marriage, then make sure to update it. Apart from the will, other accounts such as retirement accounts, insurance, bank and brokerage accounts, real estate and vehicle documents must also be updated to designate a beneficiary. If you fail to do so your assets might be transferred to the wrong beneficiary like the previous spouse who might be against your wishes.
Apart from these, the power of attorney and advance healthcare directive documents also must be updated. As both documents help you at the times of your disability when you are unable to take financial and medical decisions which are very important. You must ensure that the person designated in both the documents must be updated as per your choice so that you need not face any complex situation in the future. Hence, it is advised to review the will and other important documents at every five years interval or at the time of major life change event in your life.
Once you have planned, you must communicate this with your family as it is very important. With proper and careful estate planning, you can hon our both your vows to your new spouse/partner and provide an inheritance that is protected for and even from your own children. If you have still not planned your estate, we would suggest you to start planning now as the sooner the better.