People with blended families often confront unique estate planning problems, especially if children and stepchildren are involved. How do you ensure that each new family member is cared for if anything goes wrong?
The estate planning process for mixed families may seem confusing, but it is necessary. Creating a specific estate plan may prevent future probate court and legal complications. Today’s guide will explore estate planning for blended families.
Is Estate Planning Different for Blended Families?
Estate planning is not intrinsically different for blended families, but there are additional people to consider in most circumstances.
Estate planning attorney Christine Matus from The Matus Law Group advises, “If you have a blended family, it’s so important to make sure that you have a particular type of estate plan.”
This will require a discussion between you and your spouse about how each kid will be accounted for, especially if children from past marriages are involved.
One of the most difficult tasks for mixed families is deciding who will act as a guardian in the event of an emergency. Parents must think about who would make the best match for each child and sibling relationship.
When estate planning for mixed families, parents must exercise extreme caution when separating assets and finances. It is normal for couples to leave their whole estate to the other partner, but when there are children from past partnerships to consider, this may be more problematic.
Blended families, for example, may wish to set up a trust to guarantee that each kid gets their inheritance if one spouse dies before the other. These measures may assist in preventing future unfair treatment or arguments.
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Related: When Should You Get an Estate Plan?
Best Estate Planning Options for Blended Families
The ideal estate planning option for blended families is one that takes into consideration each family tie.
Considerations concerning inheritance amount, appointing an executor, and general fairness might arise in mixed family systems. These issues might cause complications when creating an estate plan, but they must be addressed.
To get started, consider some of the most typical estate planning alternatives for mixed families.
Trusts for Family Members
Following the death of the first spouse, all assets are transferred to a combined Testamentary Trust. The advantage of this arrangement is that the surviving parent may decide how to allocate assets depending on the requirements of each kid.
Marriage Trusts
A Marital Trust permits your assets to transfer to the surviving spouse while also earmarking any leftover assets for the children following the death of that spouse. This framework enables both spouses to create a plan that covers all of the family's children.
Outright Ownership
This estate planning arrangement transfers all assets to the surviving spouse without needing a trust for the children. This is a straightforward estate planning framework, but each spouse must trust that the other will properly account for the children.
Wills
Another alternative that does not need the use of trusts is to leave assets to each kid in your will. It might not be easy to talk with your spouse about it, but a will may be the best option when you want your child to receive your belongings directly.
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Tips for Estate Planning for Blended Families
There are some things you can do as a blended family to ensure your estate planning is completed properly.
Here are some top tips you need to use:
Maintain transparent communication. Be open with your partner, children, siblings, and other family members about your intentions.
Choose a trust over will. Matus warns that a “simple will is just not enough” when assets need to be distributed among family members.
Assign power of attorney and medical directives.
Consider adding a no-contest clause. This can prevent legal battles among beneficiaries.
What Are Stepchildren's Inheritance Rights?
So, what are stepchildren's inheritance rights? They really don't have any.
If you die without an estate plan, the state will distribute your possessions to your spouse, biological children, or your closest surviving relatives. Unless formally adopted, stepchildren do not have inheritance rights.
You must expressly identify your stepchildren as beneficiaries in at least one estate planning document, such as a will, trust, or beneficiary designation if you want them to inherit from you.
Consider the following questions to help you determine if and how your stepchildren will inherit from you:
What is your relationship like with your stepchildren?
Do you provide for your stepchildren financially or emotionally?
Is it normal for you to give your stepchildren the same amount of money as your biological children, or is there a clear difference in your ties with each?
What are the advantages and disadvantages of having your stepchildren in your estate plan?
Is your spouse simply paying for their biological children, or also for your children, if applicable?
If you've thought about your family relationships and determined it's preferable to include your stepchildren in your estate plan, there are various options for leaving them an inheritance.
How to Incorporate Stepchildren Into Your Estate Plan
You can use several estate planning methods to guarantee that your stepchildren inherit from you. Here are three of the most often-used tools for doing so:
A will and testament: Make your stepchildren the executors of your will. You may leave them a specific sum of money or tell them to receive a percentage of your estate's value at the time of your death.
Trust: Make your stepchildren the beneficiaries of a trust. You may also set up a special-needs trust or a minor's trust for stepchildren who have mental or physical disabilities or are under age 18.
A designation of beneficiaries: Certain accounts, such as life insurance and retirement savings, may be passed on by beneficiary designations rather than a will or trust. You may provide money to your stepchildren by naming them as beneficiaries on these accounts.
How Can I Exclude My Stepchild?
You don't have to do anything to ensure that your stepchildren get nothing from your estate. Unless you designate them in your will, your stepchildren have no rights to the property.
There is one major caveat: If you are married, your stepchild may inherit some of your property via your husband or partner. If you die first, your spouse or partner inherits your property and can leave (or donate) it to your stepchild. Your stepchild might inherit gifts from your will or trust, life insurance profits, personal items, and everything else you leave to your spouse or partner.
If you are married and do not make a will, your spouse and children will inherit anything you possess that does not have a beneficiary designated. They will then have the option to leave (or donate) that property to your stepchild. To prevent this, you can create a "marriage bypass trust." This sort of trust permits your spouse or partner to utilize your possessions for the remainder of their life after you die.
How Can I Safeguard My Possessions From My Stepchildren If I Pass Away Before My Husband?
Consider the following situation:
You tie the knot. You have a family. You decide to divorce. You marry again. Your new partner has kids from a previous marriage. You pass away. Your assets are transferred to your new spouse. Your new spouse passes away.
At that time, any assets you have left pass to your stepchildren or another heir of your new marriage unless you want your new husband to profit from your assets throughout their lifetime, and then you want your own children and heirs to profit from everything when your new spouse dies.
Here’s what you need to do.
Your Testament and Will
Your first defense in keeping your assets out of the hands of those you don't want to inherit them from is to have an expert estate planning lawyer prepare a strong will on your behalf.
If you have kids from a previous marriage and wish to leave anything to them when you pass, you may name them as beneficiaries in your will. You may also name your new spouse, or anybody else, as a beneficiary in your will. If you so want, you may also restrict the part of your fortune that your spouse receives.
However, you can't entirely disinherit your spouse if you are married. If you wish for your children to inherit your whole fortune when you pass, your surviving spouse may still inherit a piece of it (per your state's laws). If your spouse dies in the future after acquiring your property when you died, your property will now transfer according to their state intestacy or will laws.
Marital Bypass Trusts
Depending on how the Trust is designed, a Marital Bypass Trust will let your surviving spouse benefit from the trust income and possibly the trust principle while also giving you power over the underlying assets and how they are dispersed when your spouse passes away and no longer requires the trust.
In practice, once the marital bypass trust is established, assets from your estate are transferred into the trust. The surviving spouse is only granted certain privileges and has limited influence over the trust's assets. They may be provided with money from the trust or the authority to use the trust principal for health, schooling, or other permitted assistance or care.
They may also be granted limited appointment authority over the assets in the bypass trust. This allows the authority holder to specify that the trust's assets move to a specific group of beneficiaries (which doesn't include your spouse, your spouse's estate, or creditors of your spouse's estate).
What Are the Disadvantages of a Marital Bypass Trust?
Certain fees are associated with this type of estate planning since you will need a lawyer to advise you on the estate and tax consequences of establishing a Marital Bypass Trust, design the trust, and help with asset re-titling into the trust if required.
You must also designate a trustee for the trust, who must be paid for their work if they are professional trustees.
Should You Update Your Estate Plan After Remarrying?
After a divorce or remarriage, you should always review your estate plan, particularly if children are involved.
This is the only way to guarantee that your children are cared for and that your desires are carried out (especially regarding healthcare plans and beneficiaries).
In rare situations, you may need to revoke agreements signed with a previous spouse, and reviewing your estate plan is the best method of doing so.
Frequently Asked Questions:
What is the best type of will for a blended family?
A simple will is not going to cut it. Therefore, the best thing you can use is a life interest trust.
Can your stepmother take your inheritance?
If the estate was structured in a way that does not protect your inheritance from step-family members, then you could be removed from the will as a beneficiary. But only if the will is structured this way.
Are you required to leave assets to a former partner?
If your former partner was named a beneficiary on your will after you passed, then yes. However, there is no law that forces you to name former partners as beneficiaries, just remember to amend your will if you have separated.
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