Blended families bring an extra challenge to estate planning. Divorce and remarriage are common occurrences, and often heirs are concerned that they may be forgotten. Here are some tips which may help you resolve some financial concerns in blended families.
Consider a prenuptial agreement
A prenuptial agreement with a new spouse can protect your goals and financial resources. While a prenup may not be necessary for couples entering a first marriage, for a second marriage, or any more after that, there are all sorts of complex issues that may make such an agreement not only useful but necessary. A prenup ensures that both parties enter into the relationship with a clear understanding of each other’s estate plans.
Define accounts
We encourage newly married couples to clarify any ground rules up front regarding “yours,” “mine,” and “ours” in order to avoid confusion. It’s important that each of you have a good understanding of the new blended family’s finances. You may start out having separate accounts, primarily to pay for personal expenses, including those for children from a previous marriage.
If you maintain a joint account for ongoing expenses as a couple, it’s important to discuss how much each spouse is going to contribute monthly – an equal amount or a percentage. Keeping up clear, consistent and frank communication about finances truly helps to prevent misunderstandings.
Keep medical documents current
Who gets to make end-of-life decisions? If you don’t put your wishes in writing, your loved ones can be left with legal disputes and family fights at one of the most difficult times in their lives.
If you are entering into a new marriage, be sure to talk with us about this issue. Children from a previous marriage may have very different ideas about what should be done in the event of your incapacitation than a step- or half-sibling. Without specifying those wishes in an advanced healthcare directive and living will there can be costly legal battles and anguish for loved ones.
Modify the trust and will
Some of the ugliest family disputes that occur after someone passes away are not about money but possessions with sentimental value. Even the smallest item can have a significant emotional value, and squabbles over these belongings can cause rifts that are difficult to heal.
Trusts should be as specific as possible about what each beneficiary is to receive. This will eliminate potential infighting among siblings and between your surviving spouse and children from a previous marriage.
If you wish to leave assets to stepchildren, it’s important to include those directives in the trust or will, and include a Personal Property Memorandum. Stepchildren are not generally considered your legal heirs, and they won’t inherit anything without being named in these documents.
If you have children by a previous marriage, a trust can be a good way to protect their inheritance. It can also be used to help ensure that any previous spouses or step-children who were part of that marriage are not inadvertently disinherited by the new relationship.
Estate plans can also become complex when you want to provide for your surviving spouse and still give the children access to inheritances as soon as possible. It may be wise to leave a certain percentage in specific bequests to the children immediately upon your death, and the remainder to the surviving spouse.
Without getting those wishes in writing, you can leave your loved ones unprotected and without financial support unintentionally.
Marriage should be a time for families to come together and rejoice. Blended families can be strong, supportive and lasting. However, a large part of that comes from everyone feeling that they aren’t forgotten when a loved one passes away.
We encourage you to talk openly with your loved ones about your final goal: To have a happily blended family that remains a family, even after you have passed.