Estate Planning for the Blended Family

We’ve all heard the stories. Husband and wife, married for the second time, finally got it right. Husband has children from a prior marriage. Wife has children from a prior marriage. But now, Husband and Wife are the perfect couple and their blended family is happier than the Brady bunch. Life is good. The children get along with both parents. Husband and Wife tell their estate attorney: “When the first of us passes away, we want to provide for the survivor and, at the surviving spouse’s death for our collective children equally.” I have no doubt that this blissfully happy couple means it when they tell me that they will provide for the other spouse’s children as if they were their own.

Unfortunately, life happens. People grow, they change, they move away. Perhaps after Husband dies, Wife maintains a good relationship with Husband’s children for a period of time but then Wife’s daughter (the best, most devoted daughter in the world) moves to California and Wife goes with her. The relationship between Wife and Husband’s surviving children may then become more tenuous. First, there are annual visits, holiday and birthday cards and calls. But, over time, that connection begins to fade. Wife doesn’t mean to be disloyal to her deceased Husband when, years later, she changes her Will (which controls all of her assets along with the assets Wife inherited from Husband) to leave everything to her daughter alone. Just like that, Husband’s children will not receive anything from their father and they have no recourse.

Or, consider the following. A young, happily married couple has two small children. Tragically, the wife falls ill and passes away prematurely. Husband is left to care for the small children. Husband ultimately remarries. Perhaps he and Wife #2 go on and have children of their own, or Wife #2 has children of her own. Now, what if Husband passes away and his Will leaves his assets all to Wife #2. Even if Wife #2 has the best of intentions, the assets which Husband left to her may not be available for his children, as Wife #2 may deplete them paying for her own living expenses. Or, if Wife #2 has her own children from a prior relationship, she could create a Will that excludes Husband’s children from his first marriage.

More and more frequently, we are meeting with clients who are a part of a blended family in some capacity. Collectively, we need to be careful to create plans that both carry out the couple’s wishes while protecting the interests of their heirs. These are not easy conversations to have between otherwise happy couples. However, in these situations, proper planning is critical.

Trusts are helpful tools that can be used to hold assets for the surviving spouse’s lifetime benefit and then, at the spouse’s death, allow assets to pass to the children. In such cases, careful attention must be paid to the selection of the Trustee. Appointing the surviving spouse as Trustee does not sufficiently protect the assets held in the Trust. Consideration should be given to appointing a third party as Trustee or as a Co-Trustee along with the surviving spouse.

Also, life insurance should be considered as a way to ensure that some assets pass to children at the time of their parent’s death, while still providing for the spouse with the remainder of the estate. For example, in the first example above, if Husband had taken out an insurance policy on his life and designated his child(ren) as beneficiaries of that insurance, even if the balance of assets all passed to the Wife at Husband’s death (and she later changed her Will to not provide for Husband’s children), at least Husband could rest easy knowing that his child(ren) will have received the insurance at his passing.

If you are a part of a blended family, it is critically important that you consider the changes that life brings with it and try to protect your loved ones by implementing proper estate planning. We can help you navigate through these treacherous waters. If you would like to discuss this planning for you and your family, please call our office at (856)489-8388 and schedule a consultation.

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