Estate Planning For Blended Families

Blended families, or families consisting of a couple and their children from their current and all previous relationships, are becoming increasingly more common. Blended families and second marriages present their own unique challenges to estate planning. The main concern most of my clients in blended families have is ensuring that each spouse’s share of their estate ultimately goes to their intended beneficiary, which is often their respective children.

A client recently set an appointment with me to discuss ownership rights of her current house. The client was on her second marriage and owned her home as tenants by the entirety with her current spouse. Tenancy by the entirety is joint ownership of property by a husband and wife, in which upon the death of one owner, the other owner has title (also referred to as right of survivorship). She was alarmed when I explained that if she is the first to die, her spouse owns the home, and without an estate plan to the contrary, the home will go to his children upon his death.

Similarly, if all assets are owned jointly between a husband and wife, the assets will be controlled by the estate plan of the survivor. If the surviving spouse does not have an estate plan, all the assets will go to his or her children upon their death, leaving out the children of the predecessor.

Traditional estate planning distributes assets to the surviving spouse and then to the children upon the death of the survivor. However, this plan may not work with blended families. The traditional estate plan oftentimes gives the surviving spouse the ability to amend the documents however they choose. This might mean they disinherit certain children, or leave the estate to charities, or even to a new spouse.

The first step to ensuring an estate plan for blended families is set up according to the family’s wishes, is to have open communication about the issue. Openly discuss all of the finances and the ownership of the finances. Discuss how assets are to be distributed upon the death of both spouses. An experienced estate planning attorney can assist with this communication and help ensure that each spouse’s respective children are treated equally in the estate plan.

So what does an estate plan for a blended family look like? The most common method is to establish a joint trust, which becomes irrevocable upon the death of the first spouse. Upon the death of the first spouse, half of the couple’s assets are placed into an irrevocable trust for the limited benefit of the surviving spouse during their lifetime. Upon the death of the survivor, the assets are distributed according to the terms of the trust (typically one-half to each spouse’s respective children). This ensures that a portion of the couple’s assets are preserved for the benefit of their respective children upon the death of both spouses.

A second method is to establish a residence trust. A residence trust allows the surviving spouse to live in the residence during their lifetime, but upon their death, the home is distributed to the beneficiaries of the trust (typically one-half to the husband’s children and one-half to the wife’s children). If my client in the example above had utilized a residence trust, the home could be distributed evenly to each of their respective children upon the death of both of them.

A third method for estate planning in blended families is the use of a prenuptial agreement. This agreement can protect an individual’s right to distribute his or her pre-marital property in the manner he or she desires. A prenuptial agreement allows each spouse to control who ultimately receives their assets upon their death.

Planning for blended families can give each spouse peace of mind that their respective children will not be disinherited upon their death and ensures their children will ultimately inherit a portion of their estate. It also helps eliminate or reduce family tension. The children do not have to worry that the surviving spouse will remarry or leave all assets to their own children.

Tiffany Tucker is an associate attorney at Farrar & Williams, PLLC and can be contacted at 501-525-4401 or by email at tiffany@farrarwilliams.com. She can answer any questions you have about this subject.