What to Focus on as You Plan for the Future Together
There are innumerable ways to make a family, aren’t there? Blended families are common, and that umbrella term generally refers to families consisting of married couples with children from previous relationships. Though every blended family is unique, joining two or more families together can often present unique challenges when it comes to estate planning. With multiple sets of beneficiaries and potential conflicts, it is important to consider the following seven factors when creating a blended family estate planning strategy.
Blended Family Estate Planning Consideration #1: Clear Communication
First, it is important to have clear and open communication with all members of the blended family to ensure that everyone’s wishes and intentions are understood. This may involve difficult conversations about how assets will be distributed, and any special considerations for certain beneficiaries. Even though it may feel difficult or awkward, regular communication can help avoid misunderstandings and potential conflicts down the road.
Blended Family Estate Planning Consideration #2: Estate Planning Tools
There are many ways to plan your estate, but some tools will be better aligned with blended family estate planning needs. Trusts, for example, are an important tool for blended families because they can help ensure that assets are distributed according to the wishes of the couple. A trust can be set up to provide for a surviving spouse during their lifetime, with the remainder going to children from a previous marriage after the surviving spouse’s death. Other estate planning tools, such as wills and powers of attorney, can also be customized to meet the unique needs of blended families.
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Blended Family Estate Planning Consideration #3: Beneficiary Designations
It is important to review and update beneficiary designations regularly, especially in the event of major life changes such as marriage, divorce, birth of a child, or death of a loved one. Failing to update beneficiary designations can result in unintended consequences and conflicts. Working with an estate planning attorney can help ensure that beneficiary designations are consistent with the wishes of the couple.
Blended Family Estate Planning Consideration #4: Estate Taxes
Estate taxes can be a significant concern for blended families, especially if there are substantial assets involved. It is important to work with a knowledgeable estate planning attorney to minimize estate taxes and ensure that beneficiaries receive the maximum inheritance possible – with the lowest tax burden possible. Strategies such as gifting and charitable giving can help reduce estate taxes and protect assets, and trusts are often helpful in this manner, too.
Blended Family Estate Planning Consideration #5: Consider Pre- and Post-Nuptial Agreements
Pre- and post-nuptial agreements get a bad rap, but the truth is that they can be a very effective way for blended families to protect assets and ensure that the wishes of each spouse are respected. These agreements can outline how assets will be divided in the event of divorce or death and can provide clarity and certainty in potentially contentious situations, too.
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Blended Family Estate Planning Consideration #6: Plan for Long-Term Care
Blended family estate planning should also cover potential long-term care needs,, as long-term care expenses can be a significant concern for blended families. This may be especially true if one spouse is significantly older than the other, though it can impact any family. It is important to plan for long-term care needs and expenses in your estate plan to avoid depleting assets or placing undue burden on one set of beneficiaries. Strategies such as long-term care insurance, Medicaid planning, and the use of trusts can help protect assets and provide for long-term care needs.
Blended Family Estate Planning Consideration #7: Review and Update Your Estate Plan Often
Estate plans aren’t “one and done” affairs. In fact, estate planning should be viewed as an ongoing process, where your plans are reviewed and updated regularly. It is especially important to revisit your blended family estate planning strategy in the event of major life changes such as marriage, divorce, birth of a child, or death of a loved one. Regular updates can ensure that the estate plan continues to reflect the wishes and intentions of the couple. Working with an estate planning attorney can help ensure that the estate plan is up to date and consistent with the couple’s goals and objectives.
Estate planning for blended families can be complex, but careful consideration of the unique challenges faced by blended families can help ensure that the wishes of the couple are respected, and their assets are distributed in accordance with those wishes. By working with a knowledgeable estate planning attorney and financial advisor, blended families can create a comprehensive estate plan that provides for their loved ones and protects their assets for future generations.
If you’d like to discuss your blended family estate planning needs, we can help! At Arbor Capital, we help our clients develop comprehensive financial and estate plans that reflect their unique needs, goals, and challenges. If you’d like to learn more or schedule a discussion with us, contact us today!