Beyond The Will, Client Compass

Estate Planning for Blended Families

June 4, 2020


We have all heard the “fact” that 50% of marriages in the United States end in divorce. While that “fact” may be fiction, and the actual divorce rate is seemingly less, the reality is that more marriages do end in divorce compared with previous generations. The higher divorce rate has also resulted in a higher number of second (or third, fourth, etc.) marriages resulting in blended families. It is important to consider these circumstances when drafting an estate plan.

Although estate planners typically encourage most couples to enter into a prenuptial agreement prior to marriage, this is exceptionally important for couples merging families. A prenuptial agreement can lay the foundation for the parties’ rights and responsibilities during marriage, in the event of divorce, and at death.

It is common for non-blended spouses to leave everything to the survivor either outright or in trust for the benefit of the surviving spouse during his or her lifetime with the remaining assets going to their children on the death of the survivor. Such an estate plan frequently allows the surviving spouse to further dictate the distribution of assets after his or her death through the use of a limited power of appointment. While this plan often works for non-blended families because both spouses typically have the same vested interest in their children and other heirs, it is generally not recommended for blended families.

As an example, imagine that you and your spouse each draft Wills leaving everything to each other with the survivor’s Will providing for distributions to each of your children and your spouse’s children, all of whom are from prior marriages. If you predecease, there is nothing that would prevent your spouse from changing her Will to disinherit your children and provide that her entire estate is to be distributed to her children and their issue. Although your children may have a wonderful relationship with their stepparent now, there is always a possibility that they will grow apart or some issue may arise down the road that will sever this relationship.

So what is the best estate plan for a blended family? While every circumstance is unique, one recommendation is to create a trust that will grant a surviving spouse a lifetime interest (typically mandatory distributions of net income with distributions of principal in the discretion of the independent Trustee) with the remaining trust property after the spouse’s death going to your children. Note that it is important to have an experienced independent Trustee who understands the family dynamics and is able to make distributions as provided in the Trust while handling any tension that may arise between your spouse and children.

You may also consider making distributions to your children either outright or in trust and then maintaining the remaining assets in trust for the benefit of your surviving spouse. This way your children do not need to wait until their stepparent dies in order to receive at least a portion of their inheritance.

When it comes to tangible personal property, it is not uncommon for items belonging to each spouse to become co-mingled.  Therefore, if there are specific items you wish to leave to children or other individuals, it is recommended that you draft a written statement identifying these items and the designated beneficiary.  Under the Massachusetts Uniform Probate Code, this written statement takes precedence over the disposition of tangible personal property under a Will.

It is important to remember that your estate plan must comply with any prenuptial or postnuptial agreement entered into between you and your spouse.  Further, the disposition of certain assets such as life insurance and retirement accounts is determined by the beneficiary designation and not your Will or Trust.

Other estate planning considerations include planning for who will make financial and health care decisions in the event of your incapacity.  This can frequently cause tension between a stepparent and child and conversations with those involved are recommended when crafting an estate plan.

Finally, it is important to remember that blended families extend beyond just you and your spouse and may include subsequent generations. For example, you and your spouse may have a son whose wife has children from a previous marriage.  When crafting your estate plan you will need to consider whether you want your daughter-in-law’s children treated in the same manner as your biological grandchildren.

There is no one size fits all when it comes to estate planning and blended families can present unique challenges and opportunities for those involved.  It is important to consult an experienced estate planning attorney who recognizes these nuances and can construct an estate plan that achieves your goals.

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