Every person needs an estate plan, but it’s even more critical for blended families (or those with children from previous relationships).
Dying without a will, known as dying intestate, means that state law will determine how your assets are distributed. This can leave your spouse and stepchildren in financial peril and cause family conflict.
Update Your Will
Many people need to update their estate plans after entering a new marriage. This can result in their assets going to the wrong beneficiaries, creating misunderstandings or even litigation when they die. This is why it’s essential to understand what blended families should know about estate planning.
Intestacy laws typically dictate that a deceased person’s estate will pass to their spouse and descendants. This is problematic for blended families because it could leave children from previous relationships out of the inheritance entirely.
For example, imagine if Gloria’s two biological children from her first marriage were not included in her will, and she died and remarried later in life. Her second husband might not have them in the choice, and she ends up disinheriting her children.
Individuals need to discuss their estate planning wishes with family members, regardless of the number of remarriages they have had. They should also consider establishing documents like a living will detailing their medical wishes, a healthcare power of attorney designating someone to make medical decisions on their behalf if they are incapacitated, and a durable power of attorney that names an individual to manage their finances if they become incapable.
Create a Living Will
In most blended families, there are additional people to consider when it comes to estate planning. This includes children from previous relationships and stepchildren. You should help your clients feel how each child will be accounted for in their plans, ensuring they reflect their wishes and laws.
It’s important to discuss who should act as your client’s guardian if they become terminally ill. This will involve determining the best fit for each individual and considering sibling relationships. You should also review their beneficiaries for retirement accounts, mutual funds, and insurance policies. It’s common for people to forget to update their beneficiary information as they remarry and have new children.
Blended Families’ estate plans require special care in dividing up assets and funds. Trusts are an effective tool for separating assets for spouses and children, avoiding potential conflicts and misunderstandings after parents pass away. Regular communication between all family members is essential, especially when discussing sensitive issues like finances and inheritance. This will help prevent any rifts arising after your client’s death.
Create a Healthcare Power of Attorney
Every estate plan should contain a document outlining your wishes if you become terminally ill (known as a living will) and a durable power of attorney designating a person to handle your finances if you cannot. Having a healthcare power of attorney is essential, which allows you to set a person to make medical decisions on your behalf if you are incapacitated.
Blended households regularly have unique tiers of wealth, that could lead to complex inheritance issues. In addition to ensuring that the surviving spouse is supplied, a few couples may also need to recollect techniques to protect their kids from lenders, tax outcomes, or other issues.
A frank discussion with the surviving spouse, often conducted with an experienced estate planning lawyer, is critical. It is often difficult for family members to express their feelings, but doing so can minimize the possibility of conflict and stress after your death. A well-drafted estate plan can ensure that the surviving spouse and your biological and stepchildren are treated relatively and resolve differences between them.
Create a Durable Power of Attorney
The fine way to save you from conflicts and misunderstandings is through open verbal exchange. This can be tough, especially while own family individuals may be reluctant to talk approximately touchy topics including inheritance. However, regular conversations can help ensure each person’s desires are understood and expectations are met.
A complete estate plan should include a living will, healthcare power of attorney, and durable power of attorney. The durable power of attorney identifies the person who will manage your finances, and the attorney determines the healthcare power who will make medical decisions on your behalf if you become incapacitated. Typically, people call their spouse the person to manage their financial affairs, but this can cause problems for blended families.
For example, if your new spouse has children from previous relationships, they could be disinherited if their deceased parents named their spouse as the sole beneficiary of life insurance and retirement accounts. Setting up a trust for these assets is often better to avoid this issue. Your estate attorney can assist you in creating a trust that will meet your family’s needs.
Create a Trust
A trust is a vital part of any estate plan. It gives you control over how your property is distributed to a new spouse, biological children, and stepchildren. Without a trust, money, and assets usually handed down through a will are given to your state’s intestacy laws, which may not reflect your wishes.
It is also essential to create trust because it allows you to name someone to manage your financial affairs in the event of your incapacity or death. This successor trustee can be a trusted friend, family member, or even an experienced professional fiduciary. Professional fiduciaries are licensed and undergo background checks to ensure they can make unbiased decisions.
Blended Families Challenges
Blended families face unique demanding situations in terms of estate planning. It is critical to check your property planning approach frequently and revisit it after good-sized life changes. You can expand an estate plan that satisfies your requirements and objectives by running with a knowledgeable and experienced legal professional.