Whether a first marriage ends due to death or divorce, a second marriage can represent an wonderful opportunity for you and your new spouse. With these second marriages often comes the “blended family,” so named because your new marriage involves blending the children you, your spouse (or both of you) have from a previous marriage. In order to protect the financial well-being and happiness of everyone in your blended family, you should strongly consider engaging in prompt and comprehensive estate planning.
Blended families present a unique set of estate planning issues. In some cases, you may wish to leave inheritances to both your children and step-children, but perhaps give a larger share to your biological children. In other instances, you have a very close relationship with your step-children while maintaining little to no relationship with your biological children.
In either circumstance, you can create these legacies, in whatever proportions you see fit, in either a will or a trust. If you desire to disinherit your biological children and leave an inheritance to your step-children (and have not legally adopted your step-children,) this may require especially careful planning, in order to protect against court challenges to your will or trust.
Perhaps the most common concern, though, doesn’t involves not “his” or “hers” estates, because many couples in second (or subsequent) marriages have merged the majority of their assets. The concern, then, involves what happens to those assets when the first spouse dies. Some families may be fearful that the children of the first-to-die spouse could lose their inheritance if their step-parent alters the terms of the estate plan to “freeze” them out.
In these cases, the use of trusts may be particularly helpful. A couple with a blended family may choose to create two individual living trusts, instead of one married trust. Because trusts can be broadly customized to meet their creators’ needs, a living trust can serve to protect both a grantor’s spouse and his/her children. As an example, a living trust for a spouse with a blended family may give instructions that the assets within it are, after the grantor dies, to be used to support and benefit the surviving spouse during the rest of his/her life, and then distributed to the grantor’s children.
Alternately, if each spouse is sufficiently wealthy, the trust may dictate that the assets be distributed to the children immediately upon death. You also have significant flexibility in who is the trustee of your trust. You could, for example, name your spouse and one or more of your children as co-trustees, to ensure that both segments of your blended family have a voice in the decision-making process.
Summary: Blended families are more common than ever, now outnumbering traditional families. These families have unique and sometimes complex estate planning needs to ensure that the legacy each spouse desires to leave may come to pass. Using trusts, possibly including multiple trusts, may help a blended family provide for both the surviving member of the marriage, as well as each spouse’s portion of their blended family.