Estate Planning

Estate Planning for Blended Families
Avoid Disinheriting Your Children

In today’s family it is not unusual for spouses to enter the marriage with children from previous relationships. Parents work hard at getting these children to functionally blend together to create a happy family environment. Often overlooked is what happens on the death of one of the parents. In most cases special consideration for estate planning is needed to avoid relationship loss and possibly legal action.
Typically spouses leave everything to each other and when the surviving spouse dies, the remainder is divided amongst the children. The problem? Even with the best of intentions, there is no guarantee that the surviving spouse will not remarry and inadvertently disinherit the deceased’s children.

6 Estate Planning Considerations for Blended Families
The Family Home
    Registered Retirement Savings Plans
      Other Assets and Investments
        Choose a Trustee Carefully
        With trusts being vital to effective estate planning, careful consideration has to be given as to whom will be a trustee. For blended families, children of one parent may not be comfortable with the choice of the trustee for their inheritance. Some situations may call for multiple trustees or perhaps the services of a trust company.
        Although effective, using testamentary trusts might result in some children not receiving their inheritance until the death of their step parent. Life insurance may be the ideal solution. Proceeds from life insurance will guarantee that the children will be taken care of upon the death of their parent.

        Advantages of Life Insurance for Blended Family Planning:
        Can be an effective way to create a fair division of assets when one spouse enters the marriage with significantly more wealth;
        Death benefit is
        tax free and could be creditor and litigation proof;
        Ability to name contingent owners and beneficiaries (including testamentary trusts);
        Death benefit could be used to create a life estate under a testamentary trust, providing income to a surviving spouse with the capital going to the appropriate children at the surviving spouse’s death;
        With a named beneficiary proceeds pass outside of the will so cannot be challenged under any wills variation action;
        Provides for a significant measure of control and certainty as to when and where the proceeds will end up.

        The Elephant in the Room
        It is important to remember that whatever planning options are used, total and open communication within the family is essential to maintain family harmony and ensure everyone is aware of the state of affairs. Full discussion will avoid misunderstandings and reduce uncertainty as to what the future may hold for everyone in the family.
        Planning for blended families should involve professional advice in creating solutions that satisfy the objectives of both spouses and their respective children. Call me if you require help in this area or use the social sharing buttons below to share this article with a friend or family member you think might benefit from this information.