Why Estate Planning is Critical for Blended Families
While estate planning is important for every family, it is
especially important for blended families.
Why? Because blended families
present very unique issues for asset distribution. If you die without a will, your assets are
distributed according to state statute—in other words according to how
legislators presumed most people would want their assets distributed. But state laws are not constructed with
blended families in mind. They do not
address the complexities of a family with children from both prior and current
marriages. A blended family needs
special estate planning tools to address their unique needs.
Consider, for example, this common scenario. Husband and wife are married with children. Wife dies, and husband marries Second Wife
who has children of her own. As the two
contemplate their estate planning, Second Wife assures husband that if he
leaves her everything in his will, she will make sure his children from the
prior marriage are provided for. This may indeed legitimately be her intention. But when Husband
dies, leaving all his assets to the Second Wife, she later finds herself in financial difficulty. Despite her good intentions, Second Wife
spends most of the assets on her own children.
Husband’s children receive little to nothing.
Estate planning for blended families addresses potential
issues like this one. For instance, in
this example, Husband and Second Wife could benefit greatly from a QTIP
trust. (Qualified Terminable Interest
Property Trust). Under this type of
trust, when the first spouse dies, the survivor receives a “life estate.” In other words, the right to use the real
estate in the trust and to receive any income generated by the trust
assets. However, the surviving spouse
does not have full ownership of the trust, and cannot sell or give away the
trust assets. When the second spouse
dies, the trust assets go to the “final beneficiaries” named in the
trust—generally, the children from the first spouse’s previous marriage. An instrument like the QTIP trust would enable Husband in
our example, to provide for both Second Wife and his children.
Other planning alternatives can also accomplish similar objectives. For example, structuring non-probate assets so some pass to a second spouse and some to children from a prior marriage can also ensure that assets are distributed according to your desires, and no one gets left out.
It is critical that blended families work with an
experienced attorney, who can help them navigate the complexities unique to