Estate Planning for Blended Families – A Detailed Guide
04 November Estate planning for blended families: A detailed guide
Posted on 11:32h
in Estate Planning
It is always wise to update your estate planning after getting married or remarried and when you welcome new family members into your home. You’re not the only one with a blended family! Around 1 in 6 American children lives in a blended home. If you want to leave your stepchildren an inheritance, you will also need to take certain legal “steps”. However, estate planning can be a little complex for blended families. According to Arizona’s laws on succession your assets will pass automatically to your biological children leaving out your stepchildren completely. We’re here for you to help you create a plan that includes all of your family members. Over the years they had three additional children together. The number of children in the blended family now reaches seven. Since Arizona does not include stepchildren under this definition, Sarah’s children from her previous marriage are not eligible beneficiaries. They realized the potential for confusion and resentment if their intentions were not clearly communicated. They scheduled a meeting to discuss estate planning.
The very first thing Sarah and Tom had to do was create new wills. To make sure that everyone was included, they listed their beneficiaries by names. They then set up a trust to distribute an inheritance among all seven children in their blended families. They also named legal guardians for their children and set up a power of attorney, just in case anything happens to them while their kids are still young.
Three Important Estate Planning Steps for Blended Families
Step One: Write a Will That Names Your Stepchildren
After remarrying you’ll need to update your will. If you do not have a will, it is time to make one. Do not put it off! Each spouse should have their own will. You should cover such things as who will take care of minor children in the event that you die and how they are to be financially supported. For example, if Sarah dies and her children are underage, Tom won’t necessarily become their legal guardian or have any legal rights to care for the children unless he’s named as a guardian.
Naming a guardian for your children in your will ensures that someone you trust–like your spouse–will take care of them. To avoid any confusion or disputes, it’s important that you clearly state your choice. This decision should be discussed with all parties involved so that everyone is on the exact same page.
Step Two: Create a Trust
It’s not enough
just to have a will
–especially not when you have a blended family. A living trust is particularly beneficial for blended family members in several ways. This allows for a faster and more private distribution of assets to beneficiaries. A trust allows you the freedom to specify how your assets are divided among your beneficiaries. It gives you control to avoid ambiguity and to ensure that your wishes will be honored. A trust is harder to contest than a will. A trust adds an extra layer of security to your heirs. You and your spouse will have peace of mind knowing that your financial affairs are being handled according to your wishes. This will depend upon the family dynamics, how both spouses accumulated wealth, and their children’s needs. Step Three: Durable Power of Attorney & Advance DirectivesOccasionally one spouse will have these documents drawn up and in their
estate plan
while their recently-married partner does not. Both of you need a durable power and advance directive.
An advance directive ensures that your medical preferences are respected and followed if you’re unable to communicate them yourself. An advance directive
-
-
- ensures your medical preferences will be respected and followed in the event that you are unable to communicate. A durable power of attorney allows a person you trust to make legal and financial decisions on your behalf if you become incapacitated. This includes healthcare decisions, education choices, and financial issues. It’s important to clearly outline the scope of the POA and communicate your wishes with the designated person to ensure they understand their responsibilities.How to Divide an Estate When You Have Stepchildren
- Splitting assets in a blended family can be particularly complex. It is important to have an open and honest discussion with your spouse regarding your goals and wishes. Here are some important topics to discuss:
- 1. Beneficiary Designations
- Review and update beneficiary designations for your life insurance policies and retirement accounts. Guardianship–If you have minor children, decide who to appoint in the event that one or both of your parents die. Be sure to think about how your choices will affect the best interests of each child.
- 3. Asset Distribution
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–
Discuss how you would like to divide your assets between your biological children and your stepchildren. Will your assets be split equally between each of them or not? Why or why not. Clarify your intentions in order to avoid misunderstandings and disputes later.
4. Family Business Considerations
If you own a business
, discuss how it will be managed or passed on. Will your step-children be included in the plan if you previously had your biological children?5. Financial Obligations–
Address any financial obligations you have to your children from previous relationships, such as child maintenance or educational expenses. Debts and liabilities–
Your estate will be responsible for paying any outstanding debts. This could reduce the amount that your children receive as inheritance. Trusts and inheritance
You can specify specific assets or amounts to each of them.
8. Guardian Expenses–
If your children are under the care of a guardian, you may wish to cover their expenses. Life Insurance
–If your life insurance payout is sufficient, it can cover future costs or living expenses for your children. You can name your trust to be the beneficiary of your life-insurance policy instead of your spouse or child.
10. Education
If you have specific wishes about your children’s educational needs, consider including them in your estate planning. Communication with Children–
Plan your communication strategy to share these estate planning decisions with the rest of your family. It’s important to explain your wishes during your lifetime. If your children are old, this is the best time. After you pass, it will be up to your spouse or the executor of your estate to communicate your wishes.
Estate Planning Guidance for Arizona FamiliesWith a firm plan in place, everyone will feel included, valued, and cared for. We at Phelps LaClair understand the complexity of estate planning for blended family situations. Please schedule a consultation to get legal advice. We can answer all of your questions.
Estate Planning is not just about who inherits assets. It’s about leaving a legacy for those you love. We have over forty years’ experience in writing custom estate planning and know how to protect your family’s financial future. Call us today at to schedule a no-obligation, free consultation. Image by
Alisa Dyson from
Pixabay
on 10.2.2024. Used under the creative commons license
.
