Chances Are High That You Have a Blended Family

Chances Are High That You Have a Blended Family

Issues in Estate Planning with Blended Families in Mind

Blended FamiliesA staggering 75% of couples in California get divorced. Chances are that either you or your spouse has been divorced, and if either or both of you have children from a previous marriage, you have what we refer to as a “blended family.” A blended family may include stepchildren, adopted children, step-siblings, half siblings, stepparents, married/remarried couples and cohabiting couples. Having a blended family can result in unintended consequences if either you or your spouse dies without a will or an estate plan or without planning ahead.

Remember To Examine Beneficiaries Listed on Plans and Policies

A potential consequence after a divorce for a blended family is unintended beneficiaries listed on your plans and policies. Make sure that you name the beneficiaries you currently desire to be named in all of your accounts that may involve a beneficiary, including life insurance polices, bank accounts, brokerage accounts, IRAs and retirement plans. It is likely that you have an ex-spouse on these policies and your wishes have changed as a result of having new children and a new spouse. It is important to make sure you check the beneficiaries even if you have a will or an estate plan, as neither plan will supersede the beneficiaries you listed on your policies.

Why a Prenuptial Agreement May Be Helpful

Most people are not comfortable with the term “prenuptial”. After all, what does a prenuptial agreement have to with love? However, it is something to consider if you have children from a previous marriage and want to make sure certain assets go to your children from your previous marriage rather than a divorcing spouse. Prenuptials can help preserve these assets and give you more control over their distribution.

Don’t Allow The State To Control Your Assets

What is intestacy, you may ask?

Look at it this way: If you do not prepare a will or an estate plan for your family, state law determines where your assets go. Imagine Bob and Sue are married and are raising three children. Bob and Sue had one child together and each had one child from a previous marriage. If Bob dies without a will or an estate plan in California, Sue would get all of the community property and one third of Bob’s separate property, while Bob’s two biological children would get two-thirds of Bob’s separate property. The stepchild would likely not receive any inheritance unless Bob had adopted the child.

When the blended family circumstances become more complicated, so do the potential areas conflict and undesirable end results.

Ultimately, this can end in dissatisfaction and confusion for many family members. You can avoid intestacy law and make your choices clear by preparing a will or an estate plan.

Living Trusts Give You Control Over the Future of Your Assets

If you form a living trust, you can designate how you want your assets and legacy to be distributed and how your children will be provided for after you pass and still maintain control of the assets today. It is important to understand that if you decide one thing today, you can design your trust so changes can be made and, in some circumstances, some or all of the trust can be terminated.

There are several trusts that can work to your benefit. As an example, you can use a QTIP, or a Qualified Terminable Interest Property Trust, to determine how your estate is distributed after your death but while your spouse is still living. With a QTIP Trust, Bob would be able to determine how he wants his share of the community property and separate property to be spent on the surviving children. Sue (the surviving spouse) would still have her interest in the community property portion of the estate. A QTIP Trust is just one example of a trust that you can utilize to protect your family and assets so as to avoid undesired consequences.

Who Will Take Care of Your Children If You Die?

What happens to your children if you die? What if you have minor children, live on your own, and have an ex wife who may be incompetent or unwilling to care for the children? Also what if both parents die or become incapacitated in an accident? Through your estate plan, you can appoint a guardian for your children in the event that your new spouse may be unwilling or unable to care for them. (In California, a stepparent has no financial responsibility to care for the stepchildren.) If you do not appoint a guardian yourself, the courts will decide who will be the guardian. This is a long and arduous process where the children will undoubtedly go through some turmoil.

Always Plan Ahead

Plan ahead, keeping in mind that you and/or your spouse have children with other biological parents. You and your spouse or ex-spouses may not see eye-to-eye about the future of your children. In fact, you may not even see eye-to-eye about who would be the future caretaker who should care for of your children if you or your current spouse/partner were to die. Without proper planning, you can end up with consequences that no one in your family nor you wanted! When you consult with us at your estate planning attorneys, and tell us your needs and desires, we can work with you to make sure that your desires are met for you, your family, your assets and your legacy.

by Lisa L. McDonald

Copyright 2013 Lisa McDonald



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