When you have a blended family, there are extra considerations to take on as you establish your estate plan. You may have financial obligations due to past marriages, or you want to ensure your money goes to the people you intended it for in case of future marriages.
Here are some things you’ll want to think about when you are estate planning for your blended family.
How will marriage affect the assets you’ve already built?
When you get remarried, you have to think about how you want to manage your money. Even if you don’t consider yourself wealthy, you may have some type of life insurance policy or retirement savings you want to pass down.
Prior to the marriage, you intended these assets to go to your children. Now you will have to carefully consider whether you want to include your new spouse – and any children they may bring into the marriage – in the division of those assets.
You’ll want to consider this point all the more carefully if you meet a marriage partner in your twilight years. Any savings you have built up you have probably amassed with the intention of paying for your own healthcare expenses and providing for your children after you pass. A new spouse in the picture – especially one of an age likely to encounter increased healthcare expenses – can mess up the plans you had prior to marriage unless your estate is set up correctly.
Am I funding accounts during a blended marriage?
In many states, assets that are built before your marriage will not be considered in any future potential divorce proceedings. However, anything you contribute during your marriage could be considered a joint asset subject to division.
As you create your estate plan, you’ll want to carefully consider which accounts you contribute to in accordance with your state’s laws.
Will our exes be able to lay claim to the assets we’re building together?
Especially if you have children from past marriages, you will want to carefully consider any rights your ex-spouses may have over your current assets as laid out in your divorce agreement.
How do future marriages affect your estate?
Let’s say you pass away and your spouse gets remarried. If you are leaving your spouse in charge of the money, there’s the potential that their new partner could influence how money is spent. As your children age, their own spouses could attempt to control the assets depending on how your estate is set up.
These future potential marriages should be considered – especially in blended families.
Premarital and Marital Agreements
One way to ensure you’re comfortable with the way your money is being mixed in a new marriage is to sign a premarital or marital agreement. By default, the division of assets in divorce will be determined by your state’s laws. But with an established premarital agreement, you and your fiancé get to determine how your assets would be divided in a divorce down to the last detail. This way you can create a plan that is suitable to all family member’s needs and boundaries.
Considerations for Trusts
Trusts are another great way to protect your money from the unpredictability of future relationships. First of all, you’ll have the ability to assign a neutral third party as your trustee. Their neutrality can go a long way towards ensuring future disputes about the trust are resolved in a fair manner that is in accordance with your wishes.
Aside from picking a neutral third party as your trustee, you can also look to specific types of trusts that can affect blended family situations. Trust structures to research and discuss with your estate attorney include:
- Joint trusts.
- Bloodline trusts.
- Spray spendthrift trusts.
- Irrevocable life insurance trusts (ILITs).
- Qualified terminable interest property trusts (QTIPs).