Step-children and ex-spouses and the challenges of planning for the blended family
I love history. Reading about who came to power and why, and seeing how a seemingly insignificant decision can have huge consequences. You can’t study history for very long without realizing the importance of family and bloodlines. In our modern world of blended families it is easy to forget that the law is focused on bloodlines while we may be focused on relationships.
For example, a step-grandson may be just as much a part of the family as the other grandchildren, but unless he or she is specifically included, the typical trust or will won’t include the step-child at all. Why is that? Because there is no actual blood relationship, even though the actual relationship may be just as close and real.
Blended families involve all kinds of additional issues that require additional care in planning. There may be important assets coming from one half of the family. Children from the father’s side, the mother’s side, and maybe even children together. There are ex-spouses, divorce judgments and custody decrees. How to make sense of it all? Here is a quick “cheat sheet” of the larger issues.
The ex-spouse plays an important role in two areas: minor children and divorce decrees. Creating guardianship nominations ideally will be made jointly to prevent conflict. Realize also, the default is for the surviving parent (the ex-spouse) to be the sole parent if one parent dies.
The divorce decree may place certain estate planning obligations on the spouse. Commonly this is limited to maintaining a life insurance policy, but other restrictions and obligations may be in place for certain assets.
In a second marriage (or third or more) it is important to understand that your marriage has an automatic impact on your estate plan. You don’t have to be J. Howard Marshall II marrying Anna Nicole Smith to leave behind a colossal mess. You’ll need to establish what the new spouse is entitled to, and decide how to protect your children’s inheritance. There are a number of strategies to accomplish these and other goals. Community property rules add additional complexity in these estate plans.
Step-children aren’t part of the estate plan unless you specifically include them. Families where a formal adoption isn’t realistic, or possible can take advantage of good planning to make sure that the kids you consider to be part of your family are included as beneficiaries.
The Old Estate Plan
When family relationships change it is always a good idea to review existing estate plans. Especially if you have gone through a divorce or a new marriage, the plan you put in place before has now become outdated. In these situations the law tries to guess what you would have intended, usually making an expensive hash of things.
Bottom line: when you have a blended family clear planning might be more challenging, but it is even more important.