Blended families can be incredibly complicated, so proper estate planning is vital. Leaving everything to a surviving spouse without a will or trust can lead to problems.
If you don’t have a will or trust, state law will determine who gets your stuff. This can create conflict and resentment between your heirs.
Review Your Will
What blended families should know about estate planning? When a new marriage enters the picture, many things must be considered. The family must communicate effectively so there are fewer misunderstandings and less potential for conflict. This applies to parents and step-parents, as well as biological and step-siblings.
It is also essential to update the beneficiaries on non-will assets, such as IRAs, life insurance policies, and bank accounts. This can be done using a beneficiary form provided by the institution or by contacting a financial professional. This ensures that the assets are distributed as you wish and avoid probate, as they will pass directly to the beneficiaries without going through your estate.
Another time to review your estate plan is after the death of a loved one who was a beneficiary, fiduciary (executor, power of attorney, or guardian), or trustee. Change the person you chose for these roles or replace them with someone else. In addition, a life change such as a promotion or new job might make it a good idea to review your plan.
Review Your IRAs
Nobody wants to think about what will happen when they’re gone, but someone else will decide for you without a plan. That’s why estate planning is so important, regardless of family size or net worth.
Blended families introduce additional complexity to estate planning, particularly regarding how to distribute assets. For example, if you leave everything to your new spouse in your Will, they may not pass it on to your children from prior relationships.
Discussing your wishes with your spouse and any children you have from previous relationships is critical. It can also be helpful to speak with an experienced attorney to learn more about your options and the ramifications of your choices. They can help you craft a comprehensive plan that addresses your family’s needs. They can even help you manage the emotions and dynamics involved in a blended family. That way, your loved ones will know what to expect when the time comes. And that can help prevent disputes and disagreements in the future.
Review Your Assets
While it may seem like a waste of time, looking closely at your assets, including financial accounts, real estate, life insurance policies, and valuable possessions, is vital. Doing so can help you locate and organize your essential information and correct any errors in titles or beneficiary designations that could create problems at incapacity or death.
The problem is that many people don’t do this. Instead, they rely on their spouse to provide for their children from previous relationships and assume that the new marriage will automatically pass all their assets to their new family members after they die.
Unfortunately, that’s not always the case. And even more importantly, it can cause your family a lot of pain and heartache if that’s the case. Planning ahead and regularly reviewing your plans with an attorney can minimize opportunities for conflict and headaches for your family after your death. It’s a better alternative than leaving it all up to a judge and the court system.
Review Your Trusts
Often, a blended family will have several trusts to manage and protect the family’s assets. Depending on the situation, trusts can help prevent conflict and confusion when it comes time to distribute assets to heirs.
Reviewing and revising your estate planning documents in light of life changes such as divorces, remarriages, and new children or stepchildren is essential. These events can impact the distribution of your assets and beneficiaries in the event of your death or incapacity.
In some cases, you need to hire a professional fiduciary to handle your financial affairs and make decisions on your behalf in the event of your incapacity or death. This is a great way to avoid family conflicts and ensure your estate plan is carried out as intended. Your estate attorney can assist you in arranging this type of arrangement. Using trusts can also help keep your family’s financial matters private and out of public view. By doing so, you can prevent your heirs from having to go through probate to receive their inheritance.
Review Your Beneficiaries
Beneficiary designations are vital to many estate plans, especially for blended families. They determine who will receive an account or asset when someone dies. Most importantly, they can help ensure that assets avoid probate — which can be costly, time-consuming, and public.
It’s essential to review beneficiaries regularly, especially in light of life-changing events like divorces, remarriages, births and deaths of loved ones, and changes in family dynamics and needs. Failing to update beneficiary designations can have far-reaching consequences. For example, if an ex-spouse remains a beneficiary on IRAs, retirement accounts, or life insurance policies, their inheritance will likely be subject to federal estate taxes.
Additionally, failing to change beneficiaries can cause an asset to pass directly to a spouse or children without the benefit of tax-efficient strategies or provisions. For this reason, it’s essential to consult with a qualified attorney to address your unique estate planning needs and goals. This will include creating a plan that provides for your loved ones in the best possible way and avoids conflict when you’re gone.