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Every family is a little different, and that’s what makes families so beautiful! One common family structure is the blended family, which is a family that includes a couple and their children from previous relationships. Because these family structures are becoming more popular, it’s important to recognize blended families, especially when it comes to financial planning. According to the Love to Know website, 40 percent of families in the US are blended, with at least one partner having a child from a previous relationship.1
There’s no one-size-fits-all family, just as there’s no one-size-fits-all approach to estate planning. Let’s learn more about what estate planning might look like for a blended family and provide some information to help you examine your estate plan.
Verify Your Beneficiaries
A lot happens throughout our lives, from losing a partner to divorce to having biological children or stepchildren. With so many potential changes, it is important to verify your beneficiaries and change your will if necessary. For example, some people with blended families might still have their ex-spouse listed as their primary beneficiary on accounts such as 401(k).
Verifying that your beneficiaries are correct is essential because when you pass, your assets will be transferred directly to those people without probate. If you mistakenly put a beneficiary on your list, your family might have to jump through legal and financial hoops to make things right.
Be Specific in Your Will
Blended families often have unique interpersonal relationships, and these relationships should be reflected in your will. You may leave your assets to your surviving spouse, but upon their death, can you be sure that all remaining assets will be divided evenly among all the children, including biological and stepchildren? What if tensions run high and your surviving spouse decides to write a new will and shut your side of the family out? We never want to think of possible conflicts, especially with something as important as estate planning, but these questions need to be considered.
In addition to including your remaining monetary assets, you may also want to put sentimental items in your will.
Regulate the Flow of Money
One of the best things about blended families is that they bring together different people with different interests, passions, and goals. While accepting others is a powerful way to bond a family together, you may be faced with someone in your family who needs a bit more control when it comes to inheriting your assets. For example, a child or stepchild may have a gambling problem and head straight to Las Vegas to bet their inheritance on black. In such cases, you should consider setting up a spendthrift trust.
According to the Trust & Will site, a spendthrift trust limits your beneficiary’s access to assets. Rather than receiving a lump sum, the beneficiary receives funds incrementally. This is great protection against bad spending habits. In addition, with a spendthrift trust, creditors cannot come after an inheritance still held in the trust because it belongs to the trust, not the beneficiary.2
Just as every family is different, every estate plan is different. Setting up your estate plan properly will guarantee that your assets are in good hands when you pass. You must ensure that the desired beneficiaries are inheriting your assets if you have a blended family.