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By: Cava and Faulkner

What Are the Best Practices for Estate Planning in Blended Families?

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What Is a Blended Family?

A blended family is one created when spouses who were previously married to someone else and had children divorce and remarry, bringing the children from the previous family with them. This can be complicated on many levels, but it’s especially complex when considering estate planning.

Sometimes, one or both spouses already have an estate plan. But once they remarry and blend families, that plan is outdated and needs attention.

What Happens if There’s No Estate Plan and One Spouse Dies?

That’s known as dying intestate, and the decedent (person who died) who didn’t have a plan (or has an outdated one) causes the survivors to go through probate. Without a valid plan, it’s up to the probate court to determine how assets should be divided. The court may distribute assets in ways the decedent wouldn’t have chosen.

It can also open up legal challenges among the blended family members regarding who should rightfully receive what. If the estate is contested, it can be time-consuming and costly, meaning the assets could be drained before anyone actually receives them–something the decedent most likely wouldn’t want.

Sometimes, one spouse might believe it’s easiest just to leave everything to the current spouse, assuming they’ll distribute some of their inheritance to the children from the first marriage. But if that’s not part of the estate plan, the new spouse isn’t legally required to do so, which could lead to resentment and possible lawsuits from the children who are excluded.

What Do I Need to Know About Estate Planning with a Blended Family?

There are several factors to keep in mind when beginning the process. First, it should be something the couple has discussed as part of preparing to marry. Anytime there’s a major life event–marriage, divorce, death, birth–updating the estate plan is vital and should be done with the guidance of an experienced estate planning attorney.

One major consideration–and a primary reason to get an updated plan–is clearly delineating what property belongs to each spouse. A blended family usually has three types of assets or property.

  • Separate property. This is property (including debt) acquired by one spouse prior to the marriage. If it’s not used to benefit the marriage, it usually belongs to the spouse who had it before the marriage.
  • Community property. Any assets or debts acquired by one or both spouses while married.
  • Commingled assets. When the two spouses take what was previously separate property and use it jointly. For example, each owned a house before marriage. They each sell their separate homes and use the money to buy a joint home. That’s now community property, not separate property.

What About Other Types of Assets?

It’s easy to think of property in terms of real estate, cars, or bank accounts, but there are other types of assets that need to be considered, especially if either spouse has specific wishes for how those assets would be distributed after their death.

  • Life insurance. Life insurance policies should have a named beneficiary. If someone has divorced and remarried but didn’t change the beneficiary from the previous spouse, that could cause problems in probate. Or it may be that the person with the life insurance would rather it go to someone else, such as adult children. The insurance policy needs to be updated to reflect that.
  • Pay on death. Many bank accounts offer the option of adding a beneficiary as a pay on death (POD) or transfer on death (TOD), which allows those funds to go directly to the beneficiary without having to go through probate. But again, the beneficiaries must be up to date.
  • Retirement funds. By federal law, retirement funds must automatically be given to the surviving spouse.
  • Other assets. If one spouse inherits an asset, such as real estate, they need to decide who should inherit the property on their death, especially if they don’t want the new spouse to receive the separate inherited property.

Should I Have a Trust?

There are many good reasons to have a trust, although it shouldn’t completely replace a will, especially if there are minor children in the family. A trust can’t name a guardian in the event of the parent’s death; only a will can do that.

But a trust can do many other things. For one thing, it essentially bypasses probate, meaning the distribution of the estate is likely to be quicker and less costly. There are many different types of trusts that have various purposes. To learn which type of trust might be most advantageous to your situation, contact an experienced estate planning attorney.

Some popular options in blended families include:

  • Special needs trust. If one spouse has a special needs family member, they can set up a trust that will ensure the person will be cared for after the spouse passes.
  • Qualified terminable interest property trust. This type of trust allows one spouse to provide for the other if the trust owner passes first, but it also can be set up to ensure children from a previous marriage receive assets and are not disinherited by the surviving spouse.

What Should I Do if I Need Help Developing an Estate Plan for My Blended Family?

Call Cava & Faulkner at 916-685-1225 for a free consultation. Estate planning involving a blended family can be complex and something you shouldn’t undertake without professional advice. Every estate is unique, and there’s no one-size-fits-all plan. We can walk through the specifics of your estate and provide advice as to the best approach that will meet your needs and protect your assets.