Bankruptcy may be one of the last things on your mind when you are creating…
Once your heart has healed after a divorce, you may be looking to remarry. Or perhaps you are already a member of a blended family. How should a second marriage impact your estate plan?
Blended families include stepchildren (and step-grandchildren), children born outside of marriage, single-parent families, and situations where someone other than the parent is raising a child. Standard estate planning strategies tend to assume that you are in a traditional, nuclear family: namely, you will be married to the same person your entire adult life, only have children born of that marriage, survive your children, and decline to remarry after the death of your spouse. But how often do all of those things happen in our modern world? As blended families have become more common, additional strategies have been developed to create robust, protective plans that will protect the interests of a blended family.
Here are a few complexities that often arise when I am working with blended families to create their estate plans:
- Joint tenancy issues: In blended families, it is all too easy to accidentally disinherit children. This may sound surprising, but it is a relatively common problem that can arise when spouses with children from previous marriages place assets (like homes, automobiles, and bank or investment accounts) into joint tenancy with the new spouse without fully considering the impact this can have on those children. At the death of the first spouse, all assets that are held in joint tenancy pass to the surviving spouse automatically. Once these assets become the property of the surviving spouse, he or she is under no legal obligation to pass them on to the children of the deceased spouse.
- Outright inheritance issues: When spouses bring children from previous unions into new marriages, a will or trust that provides for outright distributions to a surviving spouse can complicate the matter of inheritances, and, like joint tenancy, can result in a child being disinherited unintentionally.
- IRA and 401K Account issues: Unless a spousal waiver is signed, federal law says that a spouse is automatically entitled to 50% of a retirement account upon the death of the account holder – regardless of what the beneficiary designation says. It is critical that you update your retirement account designations when you remarry. Even if you want your new spouse to benefit from your retirement account, you may want to ensure that the contingent beneficiaries cannot change after your death, as once the account is rolled over new beneficiaries can be named. Consider an Inherited IRA Trust for this purpose.
- Increased risk of family conflict: For many blended families, mitigating against the potential of family conflict from children against stepparents is a top priority. No one wants their assets squandered in legal proceedings if conflicts arise between biological and stepchildren after a parent becomes incapacitated or dies.
Ideally, you will have to work through potential conflicts of interest with your new spouse before you marry. If you are already in a blended family, it is not too late to start the conversation – and updating your estate plan can be the perfect way to start. You lose the opportunity to protect yourself, your spouse, and your respective children if you become incapacitated or die before you act. A thoughtful estate plan can substantially reduce or even eliminate the risks described above You deserve that peace of mind.
Littleton Legal can help you navigate estate planning tools such as wills, trusts, lifetime gifts, and beneficiary designations to create the estate plan that’s the best fit for your family. Please call us today at (918) 608-1836 to set up an appointment to discuss your unique circumstances and goals; we’d love to help you accomplish your wishes for your blended family.