Entering into a second marriage isn’t like your first. You’ve already put together your estate planning documents from your first marriage, and you didn’t give much thought to those documents after you divorced—but now you’re married again, and it’s time to revisit those documents and give them an overhaul to reflect your changing circumstances.
Creating a blended family can be a beautiful experience, even though it brings its own unique challenges into your life. In this article, MHPS Law’s estate planning experts dive into the many considerations surrounding estate planning for blended families to help you overcome these challenges, minimize conflicts, and protect your loved ones.
How a Blended Family Changes Estate Planning
When you or your new spouse have children from a previous marriage or relationship, bringing them into your new family raises questions you might have never needed to consider about how to plan your estate and divvy up your inheritance—for example, how to write a will now that you have stepchildren to consider, how to account for your new spouse and stepchildren in asset division, or how to avoid the typical inheritance issues that blended families often run into.
Incorporating the unique dynamics of your blended family into your estate planning means taking into consideration:
- How to fairly divide your assets among both stepchildren and biological children and specify your intentions to avoid disputes
- How to make guardianship decisions for biological and stepchildren if you pass away before they come of age
- Who becomes the beneficiaries of your life insurance policies, retirement accounts, and payable-on-death accounts
- How to use trusts to manage joint assets and ensure children from previous marriages are financially protected
- If needed, how to comply with prior obligations from previous divorce agreements
Exploring Inheritance Issues With Stepchildren
Having new stepchildren can bring a lot of joy and new experiences to your life. However, blended families can also come with unique inheritance issues you might not expect to run into based on your prior experience with marriage.
For example, some blended family inheritance issues you could encounter include:
- Stepchildren may not be considered legal heirs unless formally adopted, meaning they have no automatic inheritance rights and could be unintentionally excluded from inheritance if their biological parent remarries and passes away without a will.
- Disputes around the distribution of assets in your estate plan could arise if biological children and stepchildren feel unfairly treated or if one or the other is benefiting from favoritism. Typical wills for blended families often make the mistake of confusing equal treatment for equitable treatment, which can lead to some children receiving less than they need—for example, children with special needs who require more support—and others receiving more than they need.
- If you or your spouse do not update beneficiary designations after remarrying, your assets may inadvertently bypass your stepchildren upon your passing.
- Confusion and disputes might crop up if your estate planning documents no longer align with current family dynamics at the time of your passing, or if its terms are vague or incomplete.
Fortunately, none of these challenging situations are inevitable. They can be prevented with proactive, thorough estate planning and open communication about your plans and intentions with your spouse, biological children, and stepchildren to keep everyone in the loop and able to advocate for themselves and their needs.
Solving Blended Family Estate Planning Challenges with Wills and Trusts
Every estate planning challenge has a solution. Most of these solutions involve thoroughly written wills and appropriately used trusts, as long as you revisit and update them whenever your family circumstances change.
Blended Families and Wills: How to Include Your Stepchildren
When you pass away, most of your assets will pass onto your heirs through your will. Typical wills for blended families often make mistakes that can lead to disputes and conflict over your wishes, even if you only intend for the best. For example, many people will enter blended families without updating their will, which can lead to stepchildren getting shut out of inheritance or an ex-spouse inheriting it all.
Taking these tips on how to write a will when you have stepchildren to heart will help you treat your children equitably and avoid inheritance conflicts and messy probate situations:
- Clearly identify all your beneficiaries. In Tennessee, stepchildren are not automatically considered legal heirs unless they are legally adopted, so they must be specifically named in your will. Name your stepchildren explicitly and with their full legal names to ensure clarity and avoid accidental exclusion.
- Divide assets fairly based on individual needs. Clearly outline the percentage or specific assets each child, including stepchildren, should receive, while taking into account unique circumstances, such as financial needs. If you and your biological children come from a wealthy background, for example, and your stepchildren do not, it might be more fair and equitable to prioritize the stepchildren, even if the division of assets is not “equal.”
- Update your beneficiary designations. Ensure your stepchildren are named as beneficiaries on life insurance policies, retirement accounts, and payable-on-death accounts where desired, and that your designations align with the terms of your will to avoid conflicts or disputes over which represents your true wishes.
- Include a no-contest clause. If you are confident your will accurately and clearly reflect your intentions and everybody is getting their fair share, a no-contest clause penalizes legal challenges and discourages disputes over who receives what.
- Discuss your plans and address concerns in advance. Share your estate plan with your spouse, biological children, and stepchildren to set expectations and hear from all your beneficiaries about how to distribute your assets to do the most good for them.
- Seek professional estate planning help. Professional family and estate attorneys in your state know the laws regarding inheritance, what you can and cannot do with a will, and best practices to avoid common inheritance issues with stepchildren.
How to Divide Assets in a Blended Family With Trusts
Trusts are an often-underused method for preventing inheritance issues with stepchildren. Trusts are especially useful for passing down assets such as homes and other real estate properties, and can also be used to set conditions on the use of inherited money to keep it in the family or ensure it is only used toward a family member’s best interests.
Trusts come in all sizes and shapes, with different stipulations regarding how and when the assets they contain can be taken out and used. In estate planning for a blended family, you can use them to:
- Manage and distribute assets during your lifetime with a Revocable Living Trust, which avoids probate and allows you to quickly and privately distribute assets to each family member.
- Remove assets from your taxable estate with an Irrevocable Trust and protect assets intended for your biological children and stepchildren from claims by creditors.
- Provide income to your surviving spouse while preserving the principal inheritance for your children and stepchildren with a Qualified Terminable Interest Property Trust.
- Provide financial resources for a child or stepchild with disabilities and their guardian or caretakers without jeopardizing eligibility for government benefits with a Special Needs Trust.
- Provide income to your beneficiaries for a designated time and send the remainder to a charity of your choice with a Charitable Remainder Trust.
- Protect your assets from being squandered with a Spendthrift Trust, which provides controlled distributions to your children or stepchildren while shielding your assets from financial mismanagement.
These are only a few of the different types of trusts, all with their own advantages and capabilities, you can use in estate planning for you and your blended family.
Creating ironclad wills and using the right types of trust appropriately to preserve your wealth for your children, surviving spouse, and stepchildren isn’t easy—it requires plenty of knowledge of your state’s family and probate laws. Don’t plan your estate alone—reach out to MHPS’s Nashville office and reap the benefits of having knowledgeable, compassionate experts in Tennessee estate law at your service every step of the way.
To get started, reach out to our legal team for a consultation today.
