Estate Planning For Blended Families (Complete Guide)
December 29, 2022
Individuals 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? Nominating guardians, selecting an executor, and organizing your will are all part of the process.
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.
Sharing your final wishes with your partner is often the best start to estate planning. Then, when you are both ready, Trustworthy can help you keep your estate planning documents in one safe place where your family will always be able to find them.
Learn more about how Trustworthy can help estate planning choices for mixed families with a free 14-day trial.
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.
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.
Related Article: When Should You Get An Estate Plan? (According To A Lawyer)
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 that 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 utilize 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 the age of 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.
Whether you've been in your stepchildren's life since they were babies or just getting to know them, you'll need to decide whether you want them to inherit from you and, if so, how.
If you decide to make them your heirs, developing an estate plan is more vital than ever to avoid the reality that stepchildren do not have inheritance rights.
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. They will get nothing if you leave nothing to them in your will.
There is one major caveat: If you are married, your stepchild may inherit some of your property via your husband or partner.
If you are married or in a relationship with your stepchild's parent, you will most likely leave a sizable amount of your wealth to your spouse or partner.
If you die first, your spouse or partner inherits your property and can leave (or donate) it to your stepchild.
In this manner, 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.
This situation is equally true if you do not arrange your estate.
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 designate. They will then have the option to leave (or donate) that property to your stepchild.
If this bothers you, it is preventable; nevertheless, you must prepare for it.
You may, for example, 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.
Your spouse or partner will never own the property and can never give it away. When they die, your property will be distributed to your chosen beneficiaries. Consult with a lawyer to set up this kind of arrangement.
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.
Whatever your connection with your new spouse and stepchildren, this is most likely not what you'd like to happen to your possessions when you die, but that is what will happen if adequate estate planning is not implemented.
Instead, you most likely 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.
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 this is all the estate planning you have accomplished, and part or all of your estate goes to your new husband when you pass, it will become the property of your new spouse, regardless of how you design your will.
This assumes you pass away before your spouse. Consequently, 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.
In such circumstances, your stepchildren and their heirs will likely inherit part or all of your estate.
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).
While your surviving spouse gets all income from the trust for life, you may designate where the assets move after your spouse passes away in the trust document.
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.
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.
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.
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.
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.
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.
When Do Nieces and Nephews Get Inheritances?
If there are no surviving siblings, the siblings' surviving nieces and nephews are granted inheritances, which are shared equally among the remaining nieces and nephews only if there is no surviving spouse, children, or other family members.
How Should I Leave an Explanation for My Decisions?
Think about whether it would be appropriate for you to describe your choices in your will, trust, or general estate plan.
Family connections may become confusing and stressful when families merge, particularly when determining who gets what.
There are actions you can take to reduce the potential of familial friction if you believe your family will have questions or worries about the preparations you make.
First, if possible, explain your intentions and rationale to each member of your family.
If talking things out isn't an option—or simply not your style—you may leave a letter to your survivors detailing your choices.
The letter will have no legal weight, but it may provide consolation to those left behind.
This sort of letter does not have an established format. You can make it anything you want. Just make sure you stay within the provisions of your will and estate plan. Keep your letter with the rest of your estate planning documentation.
Also, if you have any fears that someone may dispute your will, oppose your estate plan, or foresee inheritance complications with stepchildren, seek the advice of an attorney who can assist in guaranteeing that your desires are carried out.
What Should I Do if I Feel I Have a Claim to a Portion of My Sibling's Estate?
Contact a probate litigation attorney as soon as your sibling dies so that you may determine what rights you may have. The sooner you seek assistance, the better your chances of receiving more of your lawful inheritance.
If you have a mixed family and an inheritance to preserve, keeping certain estate planning documents apart does not make sense. Use Trustworthy to keep your family's financial future in one safe place.