A blended family is one with children from more than one partnership. For many families, this may be a second marriage in which one or both partners have children from a previous relationship. In some blended families, the second marriage also results in children. Blended families are very common, but the default laws in California likely do not reflect how you want to provide for your loved ones after you pass. This is where a carefully thought-out estate plan comes in. While it is important for every family to plan for the future, it is particularly necessary for blended families. To avoid results that do not match your family’s needs, you will need to take time to discuss your options with your family and an attorney and prepare estate planning documents. Your family is unique, and it requires an estate plan that is unique to you.

Take a Look at the Documents that Already Exist

When creating a new family by entering into a new relationship, you will want to revisit all documents relating to your estate that already exist. With an attorney, review all previous wills, divorce settlements, and support agreements to confirm if there are any commitments to your former spouse that you will need to take into account. You can then go through all documents related to non-probate assets, such as banking, investment, and retirement accounts. You may want to take this time to update beneficiary designation documents on these assets. This is one of the biggest mistakes blended families make. Beneficiary designation forms always control over bequests in a will, so even if your will says you want all of your assets to go to your spouse, a beneficiary designation form transferring your IRA to your ex will win out in court.  As you enter into a new relationship, review all forms to make sure that there are no out-of-date designations that don’t reflect your current wishes.

Early, Open Communication about Estate Planning

Communication is essential when bringing a new family together. If you are entering into a second marriage, make sure that you take the time to discuss your thoughts about your estate with your new spouse early on.

It will be important that you and your spouse understand:

  1. What are each of your goals for your estate plans?
  2. Do you have any support obligations to your former spouse?
  3. What assets do you each bring to the marriage?

If you and your new spouse have children from previous relationships, you will want to discuss how you would like to provide for your children after you pass. If your children are minors, this will include choosing a guardian. If you and your new spouse have additional children, this will also be something to discuss. Will all of your children be provided with equal shares of your estate, or do some children have access to substantial assets through their other parent? A common example is if one partner has a child from a previous marriage and then, as a result of the new marriage, the couple has a child together. The parent with two children may wish to provide for each of her children equally, whereas the parent with one biological child and one stepchild may wish to leave more to the biological child, taking into account the potential inheritance his stepchild may receive from her father. Taking time to discuss options and priorities early and honestly is essential to creating an estate plan that makes sense and puts you and your partner at ease.

As uncomfortable as it may be, take time to consider the implications of each spouse dying first. Think about what will happen to the estate and your children in each scenario, and make sure that you are both comfortable with the results. If there is a significant age difference between spouses, one spouse may survive the other for many more years. How will the estate plan ensure that the surviving spouse is cared for? How will this impact the children’s inheritances?

If you have adult children, here is another place where communication is key. It will resolve a lot of potential conflict if you discuss your estate plan with each of your children (and other beneficiaries) in advance. Explaining your decisions to your children can help them understand your intentions and prevent hurt and stress when the time comes.

Is a Trust the Right Option for Your Family?

Many blended families prefer the option of a trust. Creating a trust allows you to be more specific about how you want your assets distributed, to whom, and for what purpose. This can be particularly useful if one spouse enters the marriage with significantly more assets than the other, if there is a substantial age gap between the two partners, or if there is a likelihood of conflict between the surviving spouse and the children.

A common choice is to create a trust, such as a Qualified Terminable Interest Property (QTIP) Trust, with the surviving spouse as the beneficiary. The spouse will receive distributions of assets from the trust for the remaining years of his or her life and then the remainder of the trust goes to the children. A QTIP Trust is also eligible for certain valuable tax benefits. If you are considering this kind of trust, it is important to think carefully about who you name as a trustee. The surviving spouse and children have conflicting interests, so it may make sense to choose an impartial third party to act as the trustee.

This kind of trust doesn’t work as well if there is a significant age gap between spouses. In that instance, a surviving spouse may continue to receive distributions from the trust for a great number of years, and the children would have to wait to receive their inheritance. Instead, the grantor might choose to make his or her children the beneficiaries of an immediate inheritance, such as a life insurance policy, so that they receive at least some of their inheritance right away. The QTIP Trust could also be capped at a certain fraction of the estate, so that children may receive a portion of their inheritance upon a parent’s death.

Deciding whether to use a trust as a part of your estate plan can be a complicated decision, but it doesn’t have to be painful. Communication is key, and so is taking advantage of an experienced and empathetic professional. An attorney can help you take a close look at your options, the implications each choice may have on your family, and the tax consequences of each.

Call The Trust Brothers at Leisinger Law today at (626) 331-1515 to get started or contact us online to schedule your initial consultation with an estate planning lawyer today.