Blending Families and Estate Planning

While estate planning can be complex for all families, it can be especially complex for those in other than a first marriage. In addition to considering your spouse and children from your current marriage, both you and your spouse may have children from prior marriages. Consider these tips:

Sit down with your spouse and discuss both of your desires.
Make a list of assets you each brought into the marriage as well as assets obtained after your marriage. Discuss how you want these assets distributed after your death. How will you address children from prior marriages? Will you each make your own provisions or will you consider all of the children jointly? Once you and your spouse reach agreement, your estate planning documents should support these decisions. Keep in mind that, even if you have a will, your spouse can often override the terms and elect to receive a statutory percentage of your estate. To prevent this, you typically need a prenuptial or nuptial agreement.

Determine whether trusts are necessary to protect your children’s inheritance.
When assets are left outright to your spouse, he/she controls the ultimate distribution of those assets. You may want to use a qualified terminable interest property trust (commonly referred to as a QTIP) to protect your children’s interests. Assets you designate are placed in this trust, with income distributed to your spouse during his/her lifetime. Since this qualifies for the unlimited marital deduction, no estate taxes will be paid when you die. After your spouse’s death, the principal is distributed to your heirs.

Review beneficiary designations and life insurance amounts.
It’s not unusual to forget to update beneficiary designations for retirement accounts, individual retirement accounts, and life insurance policies. These assets will be distributed to your named beneficiaries, regardless of the terms or your estate planning documents. Thus, take a look at those designations to ensure they are coordinated with your estate plans. Also review how much life insurance you have. You may need more to help ensure that all your heirs are treated equitably.

Check how your property is titled.
Jointly owned property automatically passes to the co-owner. You cannot change this distribution through a will.

Discuss your plans with your family.
Especially in situations with stepparents and stepchildren, you should communicate your estate plan. You don’t want your children to believe your spouse has unduly influenced you or you don’t care about them. Being open and upfront about your estate plans will hopefully prevent disagreements and misunderstandings after your death.