Featured Post

Blended families can become…MESSY!

All too often, I consult with clients who had a parent who passed away who had remarried but hadn’t made the prerequisite arrangements for their estate.

This essentially leaves two different families with the task of sorting through what passes to whom. Questions like, “Why wouldn’t they have done this before they died?” or “Why didn’t they think about this before they died?” or “Shouldn’t this have been handled when they remarried?” aren’t uncommon. In these situations, the mystery as to why those arrangements weren’t made remains largely unsolved. I’m sure the decedent’s intention was for everyone to get along and continue to live in harmony when they passed, but in reality that is seldom the outcome. Is the expectation for the second spouse to treat the decedent’s children as their own? Is it the decedent’s intention for the spouse to ask their kids for an allowance?

The most common estate planning mistakes, especially when dealing with a blended family, include the procrastination of doing what needs to be done. For instance, did you update your beneficiary designations? No grieving widow wants to hear that your previous spouse is still the beneficiary of your IRA or life insurance policy. If you intended for your children to receive your life insurance rather than your spouse for tax reasons, make sure that you actually complete and submit the change of beneficiary forms.

Though changing your beneficiary on financial documents will avoid leaving the balance to your ex, your will determines much of who gets the rest of the assets you and your spouse accumulated during your lifetimes. You probably don’t want your ex to get your home, either.

A common misunderstanding is when the will directs the beneficiary and when an asset directs the beneficiary. A specific beneficiary designation trumps your will every day. Therefore, if you have your spouse as your primary beneficiary and your children as the contingent beneficiaries, so long as a beneficiary is living from your designations, then this asset falls outside the terms of the will.

Typically, people direct that their surviving spouse gets all of their assets when they die, and only upon the death of the second spouse will the remaining assets be divided evenly among all of the children. This assumes, of course, next year, or in 20 years, everyone will still be getting along AND, MORE IMPORTANTLY, that your spouse won’t write a new will that leaves out your side of the family.

Will it happen to you? No one knows the future but after 20 years of practice, nothing surprises me. If a will can be changed after a spouse’s death, what other options do you have?

To ensure that the children of each spouse ultimately are treated fairly, trusts are often used. You can leave some or all of your assets in a trust that can support your spouse during his or her life. Then, at your spouse’s death, the trust controls who receives the remaining assets. In other words, you can ensure that your children will benefit at your spouse’s death. If your spouse remarries, this strategy protects the assets from passing to a new spouse and their children. If a trust is used, advice regarding the choice of trustee is key.

There are other considerations as well. For example, you should consider the relative ages of the spouses. If you leave all of your assets in a trust for a spouse who is much younger than you, your children would not receive any benefit until the spouse’s death, which may not occur for many years. You might consider directing a portion of your assets to your children at your death. On the other hand, if you plan to leave your estate entirely to your children (and not benefit your spouse at all), an agreement clearly waiving spousal rights is needed.

Careful consideration of your goals and communication with your spouse is key. People often have good intentions. Consulting with an experienced and skilled estate planning attorney can help you ensure your intentions to provide for your blended family are met and avoid inadvertent conflict.