While second marriages are not unusual, the financial and estate planning issues created by a blended family can be very perplexing. The key is to take proactive steps to ensure that children from a deceased spouse’s prior marriage are protected, that the surviving spouse from the current marriage is protected and that there is not a legal feud between the two.
Here are a few of the financial, legal and estate planning issues to keep in mind:
- Expenses and Ownership. If you and your new spouse commingle income and assets, it may be very difficult, if not impossible, to get those funds to those you intend to have them. There are time-tested tools to guarantee that your wishes are carried out, but the solutions are not simple. Anyone who tells you that there is a one-size-fits-all solution is not telling you the whole story.
- Community Property or Common Law? In a community property state, whatever you bring to the marriage or receive individually as a gift or inheritance remains yours, but anything else earned or acquired during the marriage is community property. In a common law state, ownership is controlled by titles, registrations, or ownership documents. The laws in some common-law states “act” like community property property states even though, technically, they’re not. Our office can help you develop an appropriate estate plan for our state, and if you own property out of state, help you plan, if necessary, for both forms of ownership.
- Remarriage Protection. If your spouse gets remarried after your death, your assets may get commingled with his or her new spouse. If that happens, your children from a prior marriage are not protected. There are estate-planning tools to protect your children – not laws, but legal tools.
- Inheritance Timing. What happens to inheritances for the children of the first spouse to die? Do they wait for the surviving spouse to die? They may, unless you set up a Trust that stipulates your intentions. Plus, if you pre-decease your new spouse and you own assets jointly, you may unintentionally disinherit your children from a prior marriage. Your new spouse may then get the final say over who inherits jointly owned assets.
- Home Use. In a blended family, will the surviving spouse be allowed to live in the home? If so, how long can he or she remain in the home? And who pays the expenses? Many couples put the home in a Trust for the benefit of the surviving spouse.
If you created your estate plan prior to your remarriage, revise that plan with your new family in mind.
Creating an estate plan for a blended family can be complicated – but it is not impossible. Like anything worth protecting, it may take some time and effort, but the sooner you get the correct pieces in places, the sooner you can have that assurance of knowing that you’re prepared for whatever happens to you.