The dynamics of a “blended” family make estate planning for such families a particular challenge. But, with blended families becoming more and more common, being able to create an effective and comprehensive estate plan for these special families has become more important. An attorney with experience in estate planning for blended families can help you create an estate plan that fits the needs of everyone you love.
What is a “blended family” exactly?
A family where at least one spouse has at least one child from a prior relationship, is considered a “blended” family. They come in all shapes, sizes and combinations. For instance, a couple could have children together, while each spouse has his and her own children from prior marriages. The family dynamic is always different, when a spouse remarries while the children are still minors. In order to accomplish estate planning for these families, it must be done on a case-by-case basis.
Using reciprocal wills for estate planning
A Reciprocal Will is a type of will that simply says, you give everything to your spouse, and then equally to all children. Each spouse will have the same language, which is why it is called “reciprocal.” After the death of the first spouse, the assets of that spouse go to the surviving spouse. Then after the death of remaining spouse, the assets go to the children. The problem with this type of will, when a blended family is involved, is that the children are not all common to the marriage.
Why reciprocal wills are not effective for blended families
A reciprocal will does not provide very much protection for children from a prior marriage because there are no guarantees that the surviving spouse will provide for those children. As the children are not legally entitled to the assets of the non-parental spouse, there simply are no guarantees. Nevertheless, most blended families use this type of will as their primary estate plan, for the sake of simplicity and lower cost, without knowing the real disadvantages of doing so.
What is the alternative to a reciprocal will?
Another option is for each spouse to create their own wills, which do not contain the exact same provisions. This way, each spouse can leave a percentage to the surviving spouse and a percentage to be divided equally between his or her own children, but not the children of the other spouse. The result is that the first spouse to pass away is not forced to rely on the surviving spouse to take care of his or her children.
Life insurance is another option
Another choice blended families have is for the parents to purchase life insurance policies that provide either for the surviving spouse or their own children. Since jointly owned assets automatically belong to the surviving spouse, the most common choice is to purchase life insurance for the children. An advantage of using life insurance for estate planning is that it guarantees, as long as the life insurance policy remains in force, that the children will receive something upon the death of their biological parent.
If you have questions regarding blended families, or any other estate planning issues for families with minors, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.
To learn more, please download our free Nevada Estate Planning For Families here.
Estate planning involves confronting some sensitive matters. For many people considering marriage, one such issue is the decision to ask your spouse-to-be to enter into a premarital agreement. Those who are entering into a first marriage without a lot of assets and no children may not need a premarital agreement. However, if you're getting remarried after you have enjoyed financial success throughout your life, the decision becomes more complex. This is amplified if you have children from a previous marriage or marriages.
If you are married and live in a community property state like Nevada or California, all earnings and efforts that produce something of value after the marriage are community property. Many people believe that so long as they don't commingle funds and assets remain titled in their sole name that they are protected. This is not the case. While the assets with which you enter a marriage are your sole and separate property, all post-marriage earnings, regardless of where they are deposited or invested, are community property. Our office has handled the administration of several estates where a surviving spouse, or the children of a deceased spouse, brought claims to establish assets titled in the name of the other spouse or his or her estate as community property. In many of these cases assets were diverted to a surviving spouse and/or a deceased spouse's children in contradiction to the intent of the other spouse's estate plan. In addition, many states laws, including Nevada's and California's, allow a spouse to make a number of different claims against the will or trust of a deceased spouse, potentially further frustrating the deceased spouse's estate plan.
To address these problems it is possible to enter into a premarital agreement. Every state has its own requirements for a premarital agreement to be enforceable. In Nevada, it is important that both parties provide a reasonable disclosure of their property and debt. In addition, it is important that both parties are represented by independent legal counsel. The agreement should also be executed as well before the wedding and, and the terms of the agreement should not be unconscionable (i.e., too one-sided). These are just a few of the factors the courts look at to determine the validity of a premarital agreement.
Aside from claims upon the death of a spouse, there is the matter of possible divorce. There is a post on the Psychology Today blog that looks at the high rate of divorce among people who get remarried after having been married previously. This piece states that 67% of second marriages do not last. Third marriages are even more precarious with a 73% divorce rate. When you understand the fact that a significant majority of second and third marriages fail, you may conclude that premarital agreements may not be in poor taste after all. Perhaps they are simply a pragmatic response to a stark reality.
There are a lot of details to take into consideration when you are planning your legacy, and the best way to address them is with the assistance of an experienced estate planning attorney. Rather than being consistently confronted with a series of unanswered questions as you think things through it is much simpler and more efficient to sit down with a legacy planning professional and work through the process from an informed perspective.
Experienced estate planning attorneys know how to proceed under any circumstances and they also understand how to adjust your estate plan on an ongoing basis as changes both within your life and throughout society as a whole take place that impact your existing plan.
One of the intricacies that people often face when they are engaged in inheritance planning involves providing for minor children. There are a number of different ways to proceed, and one of them would be to create a trust and make the child the beneficiary.
You can stipulate whatever you would like to in the trust with regard to what expenditures the trust is empowered to make in behalf of the child while he or she is still a minor. The grantor could then go on to set forth the terms for distribution of assets after the child becomes a legal adult.
Some people allow for the transfer of the total lump sum when the child reaches a particular age, and others arrange for more gradual distributions. You could even choose to include incentives such as allowing for regular distributions while the beneficiary remains in college with a lump sum to follow upon graduation.
Short of creating a trust you could name a property guardian in your will or appoint a custodian under the Uniform Transfers to Minors Act. At a minimum, parents of minor children must have a will where a guardian of the person of your children can be named.
Providing for minor children is an important part of many estate plans. If you would like to learn more details, simply arrange for a consultation with an experienced estate planning attorney.
We often talk in estate planning circles about preparing your assets for distribution to your loved ones. Depending on your personal wishes and the size and scope of your estate, in most cases this is going to refer in large part to your children and grandchildren. However, we live in an era when the typical family is not necessarily comprised of a single patriarch and matriarch. These days more than 4 out of every 10 marriages ultimately terminate in divorce. Divorce itself creates the need for an estate plan update, but the reality is that most of the people who get divorced eventually remarry.
The majority of these people have children from their previous marriages, which results in what are called blended families. If you are in this situation, there is a lot more to consider from an estate planning perspective. Depending on the dynamic that exists between the people who are getting married a number of different courses of action may be appropriate.
The thing that most people are concerned with more than anything else is making sure that their children from their previous marriages are provided for. For this reason and others, many people who are bringing considerable assets into such a marriage have the desire to separate their personal property from the community property that will result from the marriage. This can be accomplished through the execution of a pre-marital agreement, and some people will choose to create trusts in an effort to protect assets.
The QTIP or Qualified Terminable Interest Property Trust is one type of trust that is often used in these cases. These trusts provide the surviving spouse with income for the rest of his or her life. But, the grantor of the trust names the beneficiary or beneficiaries who will assume ownership of the assets after the death of the surviving spouse. This would presumably be his or her children.
Estate planning for blended families can be somewhat complicated, but there is an efficient solution for every possible scenario. It is just a matter retaining an estate planning attorney who is experienced and savvy when it comes to blended family planning.