A blended family is defined as a spouse having at least one child from a prior relationship. Most commonly, this occurs from a previous marriage, and the situation has become quite the norm in society. There is no specific recipe for a blended family, as they develop from many different variables of previous marriages, relationships, biological, adoptions, and so many other scenarios. The result is two people who have made a commitment to each other through marriage or civil union, and have combined their offspring together into one big happy family. With that said, each blended family situation is unique, and family financial planning should be designed to suit each family’s unique needs.
An important starting point is to have a conversation with your spouse, and consider what the needs are of the family. This can be a tough conversation, but can be made easier with a professional in estate planning. An estate planning attorney can lead the discussion, and help you to design your plan.
In many estate planning scenarios, the most common goal is to plan for the surviving spouse. This is called a Reciprocal Will in which upon death all property is received by the surviving spouse. Once the surviving spouse is deceased, the remaining property is then received equally by the remaining children. This approach is frequently used when the children are common to both spouses. This plan may have some disadvantages if there is concern about the surviving spouse continuing to provide for the non-biological or non-adoptive children. The reciprocal will can also be changed at any point after the death of their spouse.
The Non-Reciprocal Will is another option for blended families. In this scenario, a portion of the estate is willed to the surviving spouse, and part to just your children. Each spouse could create a non-reciprocal will. This means that each will is specific to the individual spouse’s wishes. In this plan, each spouse could name a recipient to a percentage or dollar amount, or divided equally to named survivors. This can cause unnecessary grief and questions after a spouse dies when people feel that they did not receive their fair share. Open communication is a very important component to estate planning.
Life insurance is another alternative to provide for the surviving spouse or surviving children. Life insurance purchased at a younger age is a much more affordable option than trying to purchase once you are older. This can guarantee that the children receive something upon the passing of their parent. Employer-provided life insurance can also be used in this scenario, but a privately purchased policy is always the most secure option.
A Trust is another option that is commonly used with blended family situations. The trust can provide for the surviving spouse, and then the remaining trust assets will be distributed to the children of the first deceased spouse. This approach meets the needs of both providing for the surviving spouse, as well as the surviving children. There are many options to personalize this approach.
Pre-Marital or Post-Marital Agreements can also be an option when estate planning, where there are substantial assets to protect. These agreements are best made prior to marriage to prevent any misunderstandings or feelings of distrust.
As always, a skilled professional in estate planning can assist you with the blended family predicament so that you feel 100% informed when making some of the most important decisions of your lifetime.
