Every family is a little different, and that’s what makes families so beautiful! One common family structure is the blended family. According to the Love to Know website, 40 percent of families in the US are blended, with at least one partner having a child from a previous relationship.1 It’s important to recognize blended families have unique needs, especially when it comes to estate planning.
There’s no one-size-fits-all family, just as there’s no one-size-fits-all approach to estate planning. Let’s learn more about what estate planning might look like for a blended family and provide some information to help you examine your estate plan.
Verify Your Beneficiaries
A lot happens throughout our lives, from losing a partner to death or divorce to gaining children through birth or marriage. With so many potential changes, it is important to verify your beneficiaries and change your will as needed. For example, some people with blended families might still have their ex-spouse listed as their primary beneficiary on accounts such as 401(k).
Verifying that your beneficiaries are correct is essential because when you die, your assets will be transferred directly to them without probate. If you inadvertently leave an undesired beneficiary on your list, your family might have to jump through legal and financial hoops to try to make things right.
Be Specific in Your Will
Blended families often have unique interpersonal relationships, and these relationships should be reflected in your will. You may leave your assets to your surviving spouse, but upon his or her death, can you be sure that all remaining assets will be divided evenly among all the children, including biological and stepchildren? What if tensions run high and your surviving spouse decides to write a new will and shut your side of the family out? We never want to think of possible conflicts, especially with something as important as estate planning, but these questions need to be considered and addressed legally.
In addition to including your remaining monetary assets in your will, you may also want to include sentimental belongings as well in order to make your wishes for their disposition clear.
Regulate the Flow of Money
One of the best things about blended families is that they bring together different people with different interests, passions, and goals. While accepting others is a powerful way to bond a family together, you may be faced with someone in your family who needs a bit more control when it comes to inheriting your assets. For example, a child or stepchild may have a gambling problem and could head straight to Las Vegas upon receiving an inheritance. In such cases, you should consider setting up a spendthrift trust.
According to the Trust & Will site, a spendthrift trust limits your beneficiary’s access to assets. Rather than receiving a lump sum, the beneficiary receives funds incrementally. This is great protection against bad spending habits. In addition, with a spendthrift trust, creditors cannot come after an inheritance still held in the trust because it belongs to the trust, not the beneficiary.2
Just as every family is different, every estate plan is different. Setting up your estate plan properly will guarantee that your assets are in good hands when you die. Make an appointment to discuss these issues with your fee-only financial planner now.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.