Estate Planning Solutions for Your Blended Family
I’m frequently asked questions by couples in their second marriage about how to provide for their children from their prior marriage. Married clients often find it challenging to agree with their spouse about their choices for trustees and executors, guardians for their minor children, and how their beneficiaries will inherit their estate. My clients who have divorced and remarried find the estate planning process that much more difficult with their blended family as they struggle with how to provide for their respective children equally and fairly.
According to the National Stepfamily Resource Center, more than half of all first marriages end in divorce, and approximately 75% of those who divorce marry again. About 65% of those marriages will include children from a previous marriage. Estate planning for a blended family can get complicated like when a spouse wants to leave a larger inheritance to their biological children rather than to their stepchildren. It’s important to consult with an attorney when creating your estate plan in this situation, in order to avoid such problems as an ex-spouse inheriting your bank or retirement accounts even though you’ve willed them to your children.
As you prepare your estate plan for a blended family, make sure to address the following issues:
Your Beneficiary Designations
After divorce, many people forget to update their beneficiary designations, leaving their prior spouse as the beneficiary of their financial accounts. Beneficiary designations preempt whatever is written in a will, so even if you decide to will your assets to your children, your ex-spouse will inherit any assets where he is listed as a beneficiary. As part of the estate planning process, make sure to update your beneficiary designations on such assets as your transfer on death brokerage and annuity accounts, retirement accounts such as IRAs and 401ks, life insurance policies and other financial pay on death accounts.
Carefully Consider Your Fiduciaries
When it comes to estate planning, your fiduciaries include the Trustee of your Trust, the Executor of your Will, and your Attorney-in-Fact under your Durable Powers of Attorney for Health Care and Financial Management. Many people often choose their adult children to act in these roles, but this may cause a conflict for couples with children from their prior marriages. Remember you can always choose a trusted friend or even a professional fiduciary to act instead in order to avoid family conflict.
Ongoing Spousal Support Obligations
When drafting an estate plan, I discuss with my clients the income and assets that will be available to the surviving spouse after the death of the first spouse. Couples must never forget the spousal support obligations one spouse may have to a former spouse. For instance, if a wife’s divorce settlement requires her to have a $500,000 life insurance policy benefiting her former husband, and she fails to fulfill that obligation, upon her death her former spouse will have a legally valid claim against her estate. If her former spouse is successful in his claim, the loss of those funds could significantly affect her surviving spouse’s income.
Couples in second or later marriages should always make their wishes known to their families in order to avoid discontent and ill feelings after their passing. This can be accomplished in an addendum to their wills, or even in a simple, personal letter to their loved ones. A personal note will help your children or your spouse understand and respect your last wishes and ensure that they’re followed.
Contact Skye Ferrera today at firstname.lastname@example.org and schedule your free estate planning consultation.
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