Financial Planning

3 Estate Challenges for Blended Families

Preparing your estate can be complicated, and if you’re a part of a blended family, estate decisions can be even more complex and nuanced. Blended families take on many forms, but typically consist of couples with children from previous relationships. Here are a few case studies to help illustrate some of the challenges.

Case Study #1: Children from Previous Marriages

Simple wills often are structured to leave all assets to the surviving spouse. If your estate strategy relies on this type of will, you could risk overlooking children from previous marriages. Also, while it's unsettling to consider, the surviving spouse can end up changing a will without proper measures put in place.1

When new children join a blended family, estate strategies can get even more complicated. But with a well-structured approach, you can direct how to distribute your assets.

Don’t forget to take your children’s ages into account. There’s a difference between children as heirs and minor children as dependents. When you are in a blended family and have minor children, your estate could be needed to provide for the biological children. Whereas, when you have grown children, it may be more about legacy. So, your strategy (and thus your legal documents) may change over time.

For example, one of our team members had four minor children when she got remarried, but is now down to two minor children living at home and her husband also has two minor children who live at home. After those children are grown, her focus will be less about leaving assets for the welfare/maintenance of their lives as minors, and more about leaving assets as a legacy simply for being her children. However, she will also focus primarily on making sure her spouse is taken care of since they have built their life together.

Case Study #2: When One Partner Has Significantly More Assets

While the divorce rate has been trending lower, the number of remarriages (2nd or more marriages) has increased. One person entering into a new marriage may have more assets than their spouse, given that 40% of all new marriages are remarriages for one or both spouses. An estate strategy can help ensure that your assets pass down according to your wishes.2

Case Study #3: Traditional Trusts May Not Be Enough

In blended families, a traditional trust is a good start, but it may not go far enough. One possible solution is to create three trusts (one for each spouse, in addition to a joint trust) to help address different scenarios.3

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional familiar with the rules and regulations.

Starting the Process

Blended families are pretty common these days. If you’re in that position, it’s important to remember that you can create an estate strategy to address your specific situation. The first step may be an estate document review.

If you are in need of a referral to an estate planning attorney to assist in any way, please let us know as we are always happy to connect you to professionals we know and trust.

Sources:

1. Investopedia.com, April 25, 2021; 2. OnlineLibrary.Wiley.com, January 5, 2020; 3. Investopedia.com, November 14, 2021


Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Allos Investment Advisors, LLC.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.

Published for the blog on April 4, 2022 by Allos Investment Advisors, LLC.

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