Estate Planning Tips for Blended Families

Estate planning is much more than creating a will and keeping it updated. Depending on your financial situation and goals for your family after you retire, you might find that a trust, a life insurance policy, and even designations for financial power of attorney are helpful.

Most people don’t fully understand the many estate planning tools available to them, let alone how to determine which ones best suit their needs. You also might already know that when it comes to estate planning, blended families have uniquely complex requirements. 

However, with the right guidance, you can create a plan that gives you the peace of mind of knowing your family is protected, no matter what.

While meeting with an estate planning lawyer is the best way to create your own estate plan, it might be helpful to check out some useful planning tips as you get started.

Estate planning for blended families is not always easy. As a result, some people avoid creating an estate plan because they think it’s too complicated.

This is one of the worst things you can do. If you fail to create an estate plan, your assets will be distributed according to the state’s intestacy laws. (Someone who dies without a will dies “intestate.”) 

This kind of distribution often means your assets will not go to the people you intended. It also often means your family members will have to contend with considerable estate taxes.

Before you start creating your estate plan, it can be helpful to understand some of the key challenges facing blended families.

More often than not, blended family estate planning involves splitting assets evenly between biological children and their half-siblings. This can be especially complex if you have minor children with both your current partner and former partner. 

A qualified estate planning lawyer can help you come up with a plan to ensure equitable distribution of assets.

When you divorce one spouse and later marry another, determining which assets may be passed to your current spouse can be difficult. You rarely have a clean financial break from your first spouse. Your lawyer can help you classify the property once held between the two of you:

Why does this distinction matter? In many cases, marital property from a previous marriage is passed down to the surviving spouse or children from that marriage. You might choose to divide separate property between your former spouse, your current spouse, and children from both marriages.

You’ve likely heard it countless times before — if you remarry, make sure you update your estate plan! However, many people neglect this step. If they die unexpectedly, the spouse from their previous marriage might be the only person mentioned on estate planning documents.

In Florida, this situation doesn’t necessarily mean the spouse from your previous marriage automatically gets everything. In some cases, your current spouse might be entitled to some of your assets anyway.

However, failing to update your beneficiary designations will almost certainly lead to conflict and strained family relationships, and that’s not something you want.

There is no one-size-fits-all approach when it comes to estate planning for blended families. However, in many cases, these documents are a key part of distributing assets.

This is the most basic estate planning document. It allows you to clearly divide assets between family members, and if you have minor children or pets, it also allows you to name a guardian for them.

Wills don’t shield your heirs from estate taxes, but many kinds of trusts do. Trusts are more complex to set up than wills, but many types make it easier to divide assets between children from both a first marriage and a new relationship.

A life insurance policy can help ensure your family has the necessary means to support themselves as they grieve your loss. This kind of insurance is essential if you are a family breadwinner.

These agreements may not always be considered estate-planning tools. However, having a prenuptial agreement or a postnuptial agreement can help clarify which specific assets will go to each spouse in the event of a divorce. In turn, that often makes navigating estate planning much simpler.

When it comes to estate planning, many people focus on their children from both relationships. However, it’s important to remember that your surviving spouse should receive some of your assets. This is particularly important if your children are still minors.

If you decide to leave your entire estate to your surviving spouse, you may be eligible for the estate tax marital deduction. This can help shield your surviving spouse from tax liability. Because there are some restrictions that apply, you should consult a qualified attorney before deciding if this is the right choice for you.

This is not the only way to protect your surviving spouse. A marital trust allows you to pass assets to your spouse after death. If you do this, your spouse does not have to pay taxes on the estate. There’s a catch, though — if your surviving spouse leaves the trust assets to your children after death, your children will have to pay taxes.

Bypass trusts are a slightly more complex option that allows you to minimize the tax burden on both your spouse and your children. These are often a good choice for someone with extensive assets.

Trusts are among the most useful tools for estate planning. Blended families, in particular, may benefit from the tax savings and even income generation that come with certain kinds of trusts. The best option for you depends on your specific situation. Here’s a quick look at some of the most commonly used trusts in estate plans:

Marital trusts can be especially useful when estate planning. When you set up a marital trust, you ensure your spouse will not have to pay income tax on any assets they receive after your death.

Choosing the type of trust you want is an important decision, but many people overlook the significance of selecting a trustee. Blended families often have some strain in previous relationships, and if you appoint a family member to administer your trust, they may face accusations of bias, even if they follow your wishes to the letter.

You don’t want to leave a family legacy of conflict and animosity. The easiest way to ensure the administrator of your trust is completely impartial is to appoint an independent trustee. This person is someone outside the family who is well-equipped to handle your financial affairs.

If you’re estate planning and have a blended family, you may want to pass your assets on to both biological children and stepchildren. 

If you do this, you will need to explicitly amend the definition of “children” in your will and trusts to include stepchildren. Some states automatically recognize stepchildren as legal heirs, but Florida is not one of them.

Because you won’t be around to clear up any disputes over your estate plan after your death, it’s a good idea to be careful when it comes to mixed families and inheritance. To help avoid any disputes, it’s often a good idea to explicitly mention all children and stepchildren by name.

Your attorney will be able to help you ensure your stepchildren are treated like your biological children in your estate plan (if that is what you wish). However, you should make sure your lawyer understands which heirs are biological children and which are stepchildren.

Frequently updating documents is a critical part of estate planning. Blended families are often formed when two divorced parents marry one another, and if you don’t update your estate plan in this situation, you risk having the proceeds from your life insurance policy and your assets going to your ex-spouse instead of your current spouse.

Estate planning for blended families can be messy. This is particularly true if there is a strained relationship between you and a former spouse or your new spouse and former spouse. However, there are steps you can take to reduce conflict now and after your death.

Communicating openly about your wishes can eliminate a lot of potential confusion. Some people prefer to leave assets to their children and spouses without discussing it at all. 

Discussions about estate planning can be uncomfortable, but if you don’t discuss your wishes beforehand, there may be confusion over what your personal wishes were when you created the plan.

Even if you do your best to be fair when distributing your assets, your first and second spouse and even your own children may not agree with your decisions. Family meetings allow your heirs to express their concerns, and they also ensure everyone is on the same page regarding estate planning.

It’s not unusual to want to impose restrictions on how and when your assets are distributed after death. For example, you might want the surviving parent to inherit everything and pass it on to your children after death. Or you might want each child to receive a certain amount once they reach adulthood.

Establishing a trust is the easiest way to do this. When you include clear instructions and appoint an impartial trustee to manage funds, you can go a long way toward reducing the risk of conflict. You also should nominate a successor trustee if the existing trustee is unable to continue their duties.

You should never try to set up an estate plan on your own. Some documents may be easy enough to create, but an attorney can make sure your will, trusts, and other estate planning tools are established in a way that makes them legally enforceable after your death.

Estate planning for the blended family can be a complex endeavor, but it’s well worth taking. When you craft an estate plan and commit to keeping it updated, you ensure that the ultimate beneficiaries are the people you want to benefit from your life’s work.

When you’re creating an estate plan for your blended family, you don’t want just any estate planning lawyer — you need a law firm with extensive experience helping clients build customized plans. At William C. Roof Law Group, we help residents of Orlando and the central Florida area handle the many challenges of legacy planning.

When you work with us, you can also rest assured that your family won’t be left to fend for themselves if your estate planning documents are challenged in court. Our firm is ready to handle disputes over estate plans, and in the event that someone claims your estate plan is unenforceable, we are prepared to defend your initial intent.

The best time to start estate planning is now. If you’re ready to start the estate planning process or want to update your existing plan, get in touch today to schedule an initial consultation.

The contents of this article are not comprehensive, they provide only a general overview of the subject matter discussed. This article does not establish a client-attorney relationship with the reader, and no legal decisions should be made based on the article’s contents. Because every legal matter arises under unique facts specific to the client, no legal decision should be made without consulting a licensed attorney.