Estate planning is essential for any family, be it nuclear or extended. And if estate planning is important for a standard family, how much more important is it be for blended families, with their added members and complexities? Financial and other relevant aspects of a person’s life, when planned carefully in advance, can benefit both the individual’s peace of mind at present and the family’s security and wellbeing down the line.

Think of an estate planning strategy as an investment strategy in your family’s future. In this article, we will share how to make that all-important investment with some advice on estate planning for blended families. This information should help you make the right planning choices and informed decisions for your blended family, whether you’ve been married before, have children from a previous relationship, or both.

What Is a Blended Family?

Also known as a reconstituted family or stepfamily, a blended family refers to a family in which one or both parents agree to raise a family together. The “new” family may include the children they have from their previous relationships, which may have ended due to divorce or death.

Some blended families don’t have married parents. In this type of family, the parents are cohabiting, but are willing to live together as a family and raise their partner’s kids as theirs. In some cases, the non-biological parent in a blended family formalizes the union by legally adopting their partner’s children to raise them as theirs.

Estate Planning for Blended Families: Special Considerations

Nuclear families can often easily make decisions about their assets in a simple will. Blended families, on the other hand, have to consider numerous factors when planning their estate to avoid conflict or the inadvertent disinheritance of surviving children. In light of this, a simple will is not in any way advisable as a form of estate planning for blended families. Estate planning is especially important for blended families and must be treated as such.

There are special factors to consider in the advanced estate planning legal process for a blended family. These include each spouse’s point of view on topics like:

  • Finance and guardianship
  • Real estate
  • Identification and naming of beneficiaries
  • Agents and trustees
  • Needs of minor children and other dependents
  • Ownership and distribution of assets upon the death of a spouse

These factors and more must be carefully considered to avoid complications regarding inheritance and the distribution of assets in the future. If care is not taken in planning the estate of a blended family, some of the beneficiaries of the estate may not be properly cared for.

Estate Planning for Blended Families and Second Marriages

Let’s say a couple where both spouses have children from previous relationships or marriages is doing some estate planning. It is normal that these spouses while providing for their partners in their estate plan and financial plan, would also want to make provisions for their biological children in the probate process.

Because estate planning for blended families can be a delicate subject, it is important to go about it with utmost scrutiny and caution. Here are some points to consider as you start to work towards some estate planning basics for blended families.

Review Previous Estate Plans

Individuals who are in a second marriage (or looking to get into one) should consider reviewing their estate plans from their previous marriage. No doubt it will be much more complicated than it was in the first marriage, especially if there are children on both sides from the previous marriages. However, the initial plan can serve as a stepping stone to an eventual agreement.

Find Common Ground with Your Spouse

Marriages are built on communication and cooperation, so you can’t make these calls alone. Instead, deliberate on any financial decisions, such as a combination of assets and debt settlement arrangements. It is very important to agree on these financial matters to avoid financial liabilities and loss of financial resources that may arise from the second marriage. Some couples may choose to enlist personal advisor services to help with this.

Discuss What Happens If One Spouse Dies

This is no fun, but when planning an estate in a blended family or second marriage, careful considerations must be made when deciding who gets what in the event of your demise. It is also recommended that the beneficiaries in your earlier estate plans be reviewed to ensure that effective plans are made for your children to avoid disinheritance. In other words, if you kick the bucket early, you want to make sure that your children are cared for rather than your entire estate going to your spouse.

Some couples with large or complicated estates may choose to hire or consult an estate planning attorney or financial advisor during this step. However, for most middle-class estates, estate planning can be handled without incurring the expenses associated with attorneys.

How Children in Blended Families Get Disinherited

estate planning for blended families

How do children in blended families get disinherited? The truth is, conflicts of interest are not uncommon in blended families. Despite the love and affection and the obvious unity that binds them, the parents often have a softer spot for their biological children than those of their spouse. Expert planners and any financial advisor therefore often advise blended families to consider each child’s needs when planning their estate.

Why Children Get Disinherited Specifically Under Will-Based Plans

Individuals who had will-based estate plans in their first marriage often make the mistake of sticking to such plans after that marriage ends. This is often a disadvantage to the children from their first marriage. Under will-based plans, children can get disinherited either accidentally or intentionally.

The fact of the matter is that will-based planning is just not a suitable estate planning option for blended families. A simple will that leaves all the assets of the testator to the surviving spouse can be a ticking bomb. Say a testator, Gina leaves all their assets to their spouse, Jon. Gina may hope that Jon will manage the assets properly and in turn, leave assets to Gina’s children when they eventually pass.

But instead, after a period of mourning, Jon remarries again. His priorities change. He and Gina’s children have a falling out. He and his new wife make changes to the will and leave Gina’s children out. Gina’s children will now get nothing.

Children can also be disinherited accidentally. Going by the first instance above, assuming that Jim makes no changes to the will, but has a financial disaster and leaves nothing behind in assets when they pass. Gina’s biological will then has nothing left to inherit. Can you see how it is important to consider everything that can go wrong when planning your estate? This is why legal advice often stipulates that estate owners make efforts to prevent the disinheritance of their biological children.

The Spendthrift Spouse

If one spouse spends more than the other in a blended marriage, consider their spending habits in your estate plans to avoid an unfavorable financial situation down the line. While steps can be taken to moderate the spending habit of a spendthrift spouse, it is important to note that you can’t change their habits. Leaving your assets in the care of such a spouse without making special arrangements and provisions for your biological is unwise.

A spendthrift trust will help a lot in this regard. A spendthrift trust is a kind of trust that restricts the beneficiary’s access to the principal, with benefits of the trust paid to them through the trustee. These trusts can be irrevocable or revocable trusts.

Important Tips for Estate Planning for Blended Families

To ensure that you make enough provisions for your spouse and children (both stepchildren and biological children) in a blended marriage, it is important that you take careful steps and make many a tactical investment decision when planning your estate. Below are some important tips and alternative investments that can help you to ensure that your beneficiaries and heirs are duly protected when you pass away.

Pre-Nuptial/Post-Nuptial Agreements

A pre or post-nuptial agreement is an important step in estate planning for blended families. They’re not romantic, but these agreements can help greatly in directing the distribution of your assets and provide a smooth transition of wealth to your beneficiaries in the event of death or divorce. A pre or post-nuptial agreement eliminates disputes in financial matters and ensures that surviving spouses stick to the bounds of their elective share. By doing this, they can circumvent the financial stress and physiological stress of complicated divorce or litigation. So if you don’t already have one, take this step ASAP.

Qualified Terminable Interest Property Trust (QTIP)

This type of living trust is designed to protect the biological children of the trustor from disinheritance. It does so by providing lifetime income for the surviving spouse and distributing the remaining assets among the trustor’s biological children upon the spouse’s death.

Special Needs Trust (SNT)

These types of trusts are designed to ensure that a family member (child or spouse) with special needs is adequately cared for even after the death of the trustor. This trust, once established, works to maintain the beneficiary’s eligibility for social and health benefits.

SNTs can be revocable trusts or irrevocable trusts depending on choice. They are funded with assets passed on upon the death of the trustor, thereby restricting beneficiary access. The proceeds are then put towards their special needs expenses.

Irrevocable Wills and Irrevocable Life Insurance Trusts

Irrevocable wills are normal wills, but with an agreement to not revoke the wills without the other spouse’s knowledge to avoid disinheritance. Irrevocable Life Insurance Trusts (ILITs), on the other hand, are irrevocable living trusts tied to a life insurance policy. When the insured person dies, the death benefits are transferred to the irrevocable trust to benefit the beneficiaries named in the trust. This type of estate planning technique is especially useful for blended families.

Other Important Considerations

Determining how your assets and real estate are divided among your spouse and children in a blended marriage can be challenging. You will want to make sure that your spouse and children are adequately provided for without leaving anyone or out leaving any loophole.

Here are some of the special considerations for protecting the financial lives of your beneficiaries via your estate:

  • Which assets should go to your spouse
  • Which assets should go to your children
  • How best to protect your children’s inheritance
  • Who should have access to your bank accounts
  • Who should get what in the event of a beneficiary’s death
  • How beneficiaries can access and use their inheritance
  • Providing for stepchildren
  • Planning for higher education
  • Designating a trusted trustee or executor

The Best Estate Planning for Blended Families

Summarily, the estate planning and financial planning process for blended families takes more time and effort than planning for nuclear families. This can, understandably, result in financial stress and physiological stress. If you’re in the process of this kind of estate planning, it can be easy to feel overwhelmed. Don’t worry; A People’s Choice is here to help with any of the legal document preparation you need as you plan your estate.

This information shouldn’t be taken as legal or financial advice, but should you have other questions or inquiries regarding estate or financial planning, check out other posts from A People’s Choice to gather information. And, of course, feel free to reach out to us for the preparation of your legal documents at costs that will leave plenty for you and your family to enjoy.