Remarriage rates after divorce are over 75%. As a result, blended families are simply part of the fabric of our culture. Each spouse may bring children from a prior relationship. The blended couple may have their own biological children. The new blended family may appear as the Brady Bunch with all kids of the same age or there may be vast age differences between the children. Older couples embarking on remarriage may place their grown children in instant relationships with newly minted 40-something-year old stepbrothers and stepsisters.
While all circumstances are unique, by and large, the estate planning goals of blended families remain fairly consistent: 1) provide for the surviving spouse; 2) provide for the children; and 3) preserve the estate for the children and their descendants. There may (does) exist inherent tension or conflict among these goals. The good news is that proper estate planning tackles these issues directly; establishes a structure to achieve each of these goals; provides clarity and certainty for all family members; and reduces the potential for future conflicts.
The process begins with careful listening to, and exploring, the expressed desires and goals of couples in a blended family. Quite often, one spouse may place greater emphasis on preservation of assets for children of prior marriages. One spouse may want to ensure that the surviving spouse’s needs will always take priority. One spouse may desire that the biological children of the blended couple come first. A candid, and perhaps even difficult, discussion is necessary to understand not merely the goals, but also the blended family dynamics, already existing conflicts, and potential future areas of conflict. Only then can a proper estate plan be crafted with appropriate protections.
Assets can be held and managed in different fashion within living trusts allowing for distributions to the surviving spouse or children while still providing creditor protections, asset protections and wealth preservation. For example, the blended couple may agree that certain assets should be “locked up” in trust for the children, but could still be used by the surviving spouse for emergency situations.
Where appropriate, certain assets may intentionally be left to pass beyond a living trust to ensure “minimum” distribution amounts to beneficiaries. A life insurance policy could designate the children of one spouse as beneficiaries thereby providing an amount certain to those children upon the death of that spouse. 401(k) plans can be utilized in a similar fashion. However, care must be taken in this approach as those assets may become subject to creditors of the designated beneficiaries.
As importantly, structures may be established to lessen or eliminate future entanglements between the surviving spouse and stepchildren, or among the different families brought together in the blended family. Professional trustees may be used to ensure independence in trust administration. Separate trusts may be established to address the assets of each spouse so that the separate families need not involve each other on estate administration matters.
Numerous methods remain readily available to accomplish the oft-times complex goals in the blended family situation. It all starts with the honest discussion and evaluation and prioritization of those goals. Michael Geiger can help with his experience in estate planning. Contact Michael at Geiger Law for assistance with all your estate planning needs, including assistance with your own Brady Bunch blended family.