Carissa Giebel column: Estate planning for blended families
Jan. 27, 2014 |
Estate planning for blended families can be complicated and usually involves a number of different considerations from traditional estate planning. A couple needs to determine what their goals are and a professional can assist in determining how best to accomplish those goals.
A few of the many considerations that you may want to keep in mind include providing for your spouse, protection for your children, and tax planning.
Usually a trust is the best way to go in planning for blended families. Trusts can be established to make sure spouses are provided for, while still providing some tax planning benefits and protecting some assets for your children.
There are a number of ways to set a trust up, all depending on what your individual goals are. Also, some couples keep assets individual by a prenuptial agreement, while others do not, making most, if not all, of their assets marital property. This affects the type of planning that should be done too.
If there are any beneficiaries who may be on government benefits, a special needs trust can be used so their inheritance would not affect their benefits.
Perhaps you have a beneficiary who is not financially responsible and you do not want them to have access to their full inheritance all at once. A trust can help accomplish your goals in that situation, too.
When a married couple each does a will, leaving all the assets to the surviving spouse, and then at the second death, distributing the assets to both of their separate children, it’s important that each person fully understands that the spouse could always change their will at any point.
This leaves the potential for the other spouse’s children to be disinherited. It also leaves potential for the surviving spouse to end up in a long-term facility, spending done most, if not all, of the remaining assets on the cost of care.
On the other hand, in a marriage where there are children from outside the marriage, it’s not automatic that all the assets will go to the surviving spouse if no planning was done. The titling of assets plays an important role here.
For most accounts titled jointly, when one of the owners passes away, the surviving owner becomes the sole owner of the entire account balance. These joint accounts are not typically distributed according to the terms of a will either.
Making sure beneficiary designations are up to date and coordinated with the overall estate plan is necessary. If the spouse is named as beneficiary on a life insurance policy, but the will says to give only half of the assets to the spouse and the other half to the children, the spouse will get the full death benefit on the life insurance policy. Beneficiary designations override the will. It’s important to make sure an ex-spouse is not named anywhere.
It’s important to make sure powers of attorney are updated, naming someone to manage finances and make medical decisions, if you are ever unable to.
Decisions need to be made on who you want to inherit what assets, and who you want to manage your assets if you are unable to, whether due to disability or death. Since there are so many factors that can influence the planning required to accomplish your goals, I recommend meeting with an estate planning attorney to discuss your options and all the factors to take into consideration.
Carissa Giebel is an estate planning attorney and partner at Legacy Law Group, LLC. She can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it., www.legacylawllc.com or (920) 560-4651.
