Estate Planning for Blended Families: Special Considerations

Estate planning is something that most people should seek the help of an attorney with, but for blended families, this becomes even more important. Blended families tend to have estate planning situations that need special consideration, and that’s something that a DIY will and trust website simply can’t manage. With the help of an experienced estate planning attorney, however, you can make sure that all of your bases are covered!

Understanding the Needs of Blended Families

Blended families have their own emotional and relational dynamics to work through, but they can also have some unique legal issues to navigate when it comes to estate planning. Each family is unique, and this is especially true when you blend two families together.

One estate planner put it this way: “If you’ve seen one blended family, you’ve seen one blended family.” In other words, each blended family is different and has different needs – there is no “cookie cutter” solution.

In addition, a blended family may face challenges such as:

• One or both spouses may have assets from their previous marriage in addition to assets from their current marriage. Without a clear estate plan, it can be a long, costly process to determine who these assets will go to.
• One or both spouses may have an estate plan already in place, and that plan may not have been updated. This could mean that an ex is named as a beneficiary, or that adult children are not named at all.
• Each spouse may have assets that were inherited either before or during the marriage, which can get tricky, especially when determining how to divide these assets between adult children and their new spouse.
• Children from a previous marriage may be entitled to an inheritance that is different from children the couple have together. This can result in hurt feelings, arguments, and a lengthy probate process.
• Children from previous marriages may be adults, while children the couple has had may be minors. Both will have different needs that can be taken care of in their estate plan.

These are just some of the estate planning challenges that a blended family may face. There are solutions to each of these situations, but you’ll need an experienced estate planning attorney to help you find the solutions that best fit your family’s needs.

Key Components of an Estate Plan for Blended Families

Will

A will is a foundational component of most estate plans. This document is a set of instructions for the court, outlining how you want your assets divided. It can also include instructions that may clarify how you want other pieces of your estate plan to be handled.

For a blended family, your will can add an additional layer of clarification as to how you wish your assets to be distributed between your current spouse, a past spouse (if you wish), your biological children, your stepchildren, and any organizations or causes you may wish to donate to.

Trust

A trust is a legal entity that “holds” specific assets. Many trusts, called revocable trusts, allow you to make changes throughout your lifetime – but once you die, everything in the trust is managed by your trustee. They will then follow your specific instructions regarding how to manage or distribute the assets in the trust.

There are several types of trusts, each one designed for a different situation. Your attorney can help you create the specific trust(s) you need.

Power of Attorney

A power of attorney allows you to assign responsibility for making decisions regarding your legal, financial, healthcare, or property matters to someone you trust, should you become incapacitated.

For blended families, a power of attorney can also be helpful to give a stepparent the legal right to step in to help a stepchild – or for an adult child to help a stepparent – should either be needed.

Medical Directives

Another important part of an estate plan is determining what you want done in the case of a medical emergency or incapacity. An advance directive gives your family members clear instructions for what you do and don’t want so that they can advocate for you.

Beneficiary Designations

In a blended family, updated beneficiary designations are extremely important. These designations will allow you to name your spouse, stepchildren, and biological children to receive specific assets when you die.

Some of your assets can be passed down through a trust, but there are some assets that are better left out of a trust – and for these, beneficiary designations are a necessity.

Your estate planning attorney can answer any questions you have and help you make sure all the details are covered.

Special Considerations for Blended Families

Protecting the Interests of the Surviving Spouse

In blended families, finding the balance between providing for the surviving spouse and preserving assets for your children and stepchildren can be a challenge. There may be relational issues at play and you may have both adult and minor children.

There are ways to provide for both in a well-constructed estate plan. One option that some families find beneficial is a Qualified Terminable Interest Property Trust, or a “QTIP” Trust. It may have an odd name, but it can be a powerful tool!

A QTIP trust is a legal tool that may help you avoid unnecessary estate tax (sometimes also known as a “death tax”) when the first spouse dies. Essentially, the assets of the spouse who passed away will transfer into a QTIP trust, which is designed to provide for the surviving spouse throughout their lifetime. 

Upon the surviving spouse’s death, remaining assets could transfer into a trust that allocates those assets to the children, per the instructions left to the trust. This process may avoid or alleviate unnecessary taxes and it also may  provide for your family after your death without the arguments or probate process.

This is just one example of what your estate planning attorney can do for you!

Providing for Biological and Stepchildren

Your estate plan doesn’t have to stop there – you can also anticipate the needs of your biological and stepchildren and provide for them in your plan. This can do a lot to make sure all of your kids are provided for and to stave off any potential arguments that may erupt when emotions are running high.

Following are examples of the strategies your estate planning attorney might recommend:

• Equitable Asset Distribution: When you create your estate plan, you can talk with your spouse and attorney to think ahead about how to divide your assets among your children. You can clearly specify what each child will receive and in which structure, depending on their age and ability to manage those assets.
  
  For example – you may have a child in their 30s that is fully capable of handling their inheritance responsibly. You may also have a child that’s 19, and while they are legally an adult, they may not have the experience or ability yet to manage an inheritance. In this case, you could structure the plan to release their inheritance over an extended period of time or to allow them to withdraw a larger amount for something like college expenses or a down payment on a house.
  
  However, you may also have minor children that will need continual care and support for years to come. You can structure their inheritance to cover the costs they will have as they grow.
  
• Education and Support Funds: if you would like to establish specific trusts or funds to cover the cost of your children’s education, you can do so in your plan.
  
• Personal Property Memorandums: Many times, a child, sibling, or other family member will want to keep something to remember you by – something they treasure and will value. This might be something sentimental, like a favorite piece of decor or recipe box, or it might be something that reminds them of a favorite activity with you.
  

By being intentional and specific, you can provide for all of your kids in ways that will make it easier on everyone.

What Happens If I Don’t Have an Estate Plan for My Blended Family?

If you die without an estate plan in Illinois and have at least $100,000 in assets or own real estate, the probate court will likely decide how your assets are divided. This can be particularly complex for blended families because family dynamics often include biological children, a new spouse, and children from previous marriages. The court will do its best to divide assets equitably, but it may not align with your wishes or properly account for the needs of all family members, including a surviving spouse or minor children from a previous marriage.

The probate process is long and costly, potentially taking over a year to complete. In the absence of clear estate planning documents, disputes can arise from former spouses or other family members. Additionally, state law may automatically leave certain assets, such as bank accounts or retirement savings, to a current spouse, even if you intended for them to go to your own children or a beneficiary from a previous relationship.

To avoid this, estate planning for blended families is crucial. With the help of a qualified attorney, you can create a tailored estate plan that includes living trusts, marital trusts, or prenuptial agreements to protect your assets and ensure that your wishes are honored. Proper blended family estate planning also helps you manage beneficiary designations on retirement accounts and life insurance, ensuring all family relationships are considered.For the best solution tailored to your family’s needs, consult with a qualified attorney to discuss your estate planning options and protect your family’s future.

DISCLAIMER: Any information contained herein is solely for informational purposes. While it is important that you educate yourself, nothing herein should be construed as legal advice or create an attorney-client relationship. For specific questions, we urge you to contact a local attorney for advice pertaining to your specific legal needs.