Estate Planning for Blended Families
Every family can benefit from a comprehensive, well thought out estate plan. In the case of a blended family, however, planning is even more critical to ensure that your family members are taken care of the way you desire.
Special Considerations for Blended Families: Inheritance
Any time there are children in your life who are not also the children of your spouse, you should consider yourself a blended family for estate planning purposes. The same is true in reverse, if your spouse has children who are not also yours.
If you are unmarried with children, the law will take care of your children when you pass even if you don't have a will. If you are married and your children are also your spouse's children, the law will give all of your assets to your spouse who is assumed to be willing and able to take care of your children.
In a blended family, if you have no will, the law will give the first $100,000 and half of your assets to your surviving spouse, and divide the rest between your children. This calculation applies to the assets that pass through probate. It does not apply to your interest in a jointly owned home, which will pass to your spouse automatically. It also does not apply to your life insurance proceeds, which will pass to whomever you have named as a beneficiary.
What this means is that the calculation under state law may leave little or nothing to your children. And when your spouse passes, the law makes no provision for him or her to distribute anything to them if they are not also their children.
Special Considerations for Blended Families: Your Incapacity
A key element of an estate plan is planning for who can make decisions for you if you are incapacitated. The two documents most people have are a health care proxy and a durable power of attorney.
In a traditional family, people most commonly entrust their spouse with these responsibilities and name one or more of their adult children as alternates if the spouse is unable to do it.
In a blended family, the decision may be more complex. If you remarry after your children have grown, you may want your adult children to serve this role instead of your spouse. You may even want one of your spouse's children to serve this role.
What you don't want in a situation of crisis is for there to be uncertainty. This creates the opportunity for conflict between your spouse and your adult children if there are disagreements about medical or financial decisions.
Special Considerations for Blended Families: Long Term Care
Without planning, any family can find their assets depleted by the cost of long term care. This can cause additional stress and conflict in a situation where the spouse who does not need care has children from a previous marriage. That spouse may end up needing to spend down the legacy they meant to leave for their children to cover their spouse's long term care costs.
If you are 65 or older, you should consider a Medicaid trust for yourself and your spouse to make sure you can preserve some of your legacy if you need long term care.
What Estate Planning Documents a Blended Family Needs
First, both you and your spouse need a will to make clear who you do and don't want to leave assets to. Many people want to leave something to their stepchildren, which simply will not happen if you do nothing. Others want to safeguard specific family assets for their own children, which also is likely not to happen without a will.
Second, both you and your spouse need a health care proxy and durable power of attorney to avoid uncertainty and disagreement about decision-making if you are injured or incapacitated.
Third, you should consider creating trusts that allow you to take care of your spouse during his or her lifetime but preserving the core assets for your children. Trusts are very flexible instruments, and you can specify almost any plan you want. A common example is a trust that provides the income from the assets to the surviving spouse for their lifetime, but distributes the remainder of the trust to your intended beneficiaries on their death.
Finally, if you are over the age of 65 you should consider a Medicaid trust to protect some of your assets from the costs of long term care for yourself or your spouse. This trust, too, can specify the ultimate beneficiaries in whatever way meets your family's needs and your wishes. The key difference from a revocable living trust is that you can place assets out of reach to allow you to qualify for Medicaid assistance with long term care.
How We Can Help
A conversation with an estate planning attorney is the first step toward knowing what you need to protect your assets and your family. We can help you assess your situation and make the right plan to protect your family and avoid or minimize taxes and court involvement. We have a simple process for getting you from wherever you are now to executed and final documents. It starts with an initial consultation, which is absolutely free. You can use the button below to schedule your consultation, or simply give us a call at 781-784-2322, or fill out our web form.