Blended Family Estates: 5 Things You Need to Know

Estate planning is essential for everyone, although it becomes increasingly more important if you have children or valuable assets… or both.

If your family is “traditional” and you were to die without a will, it’s likely that under the default “intestacy” laws in your state (i.e., the laws that determine the order of inheritance when there is no will), your spouse and/or children would still inherit your assets. This is probably fine for most people.

However, the states do have different rules about whether everything goes first to the spouse if the spouse is alive and then to the children, or whether everything is divided in some way among the surviving spouse and children. Depending on your preferences and financial situation, your state's default may or may not work well for your family.

In addition, if you have a blended family, or you have children with multiple partners, the importance of planning ahead becomes infinitely more important. Like everything else about estate planning, this isn’t just about protecting assets—it’s also about protecting relationships.

For example, your second spouse might have a great relationship with your daughter from a previous marriage, but if your daughter ends up inheriting half of the house that you and your current spouse had planned to live in through retirement… well, let’s just say it could be hard to maintain a smooth relationship. On the other hand, if you lived in a state where the default rules would give most of your estate to your spouse rather than dividing it among your spouse and children, your daughter might wonder why she'd been effectively disinherited in favor of her step-mother.

1. Talk to Your Spouse, Ideally Before Marriage

If you’re planning to get married and you and/or your future spouse have kids from prior relationships, you should have a conversation about what you envision everyone’s place in your will would be. Talking about this before you actually get married is a good idea, because that’s when you would execute the first blended-family-estate-planning document: The Prenup.

2. Sign a Prenuptial Agreement

In popular culture, there is a tendency to think of prenuptial agreements as a callous way to keep your spouse from taking your money if you divorce. But, people who are getting married for a second time and/or have kids from a previous relationship are generally older and more likely to have assets than those getting married for the first time. And while it's true that prenuptial agreements can limit divorce settlements, they can also be the first step towards making sure that your wishes are protected in the event of a death.

You might, for example, want your spouse to be able to live in your home but also want to ensure that your children inherit the house after both you and your spouse have died. You might want to make sure that the vacation home you inherited from your parents and share with your siblings goes to your children, not your spouse. All of those things can be accomplished with a prenuptial agreement.

Usually, a prenuptial agreement will only be enforceable if both spouses are given an opportunity to talk to their own lawyer, so check the rules in your state and talk to someone with experience before you decide to sign a prenup.

3. Write a Will

In addition, if you have a blended family, writing a will is essential. A will is the simplest way to lay out exactly how you want your assets to be distributed after your death to everyone in your family - not just your spouse.

If you have a prenuptial agreement, your will should usually be consistent with the terms of the prenuptial agreement as courts will usually give priority to the prenup.

Wills can also be used to nominate a guardian for your children if both parents die, and you can use a will to leave money not only to your own children, but also to your step-children.

4. Consider Setting Up Trust Funds

Trust funds are the best way to control your assets after your death. In the above example of a house you want your children to inherit after their step-parent’s death, a trust fund can accomplish the same thing as a prenuptial agreement, and is often an even better vehicle for doing so (especially if you’re already married). You can also set up funds to pass money to your children or your step-children upon your death.

5. Update the “Beneficiaries”

Make sure the “beneficiaries” section on your life insurance, retirement accounts, investment accounts and any other types of accounts that would not go through probate are up-to-date and accurate.

A complicated family means a more complicated estate. If the right steps are taken now, however, you can protect your blended family’s financial future and provide emotional stability even after your death.

And, remember, Tomorrow is not a law firm, and we do not provide legal advice. When in doubt, talk to a licensed attorney in your area.