Estate Planning for the Blended Family

One thing often overlooked when parents remarry is the importance of updating or creating their estate plans.

Here’s the story of a lovely lady who was bringing up three very lovely girls… Many of us know the rest of this ditty, and probably have the tune in our head right now. The Brady Bunch was an iconic show which portrayed the joys and the struggles associated with a blended family. One thing often overlooked when parents remarry is the importance of updating or creating their estate plans.

It is essential to have an estate plan that takes into account every unique family situation. There must be good communication about future goals and desires for distribution of assets. Communication at the start of the relationship will help alleviate future ambiguity and conflict.

Estate plans for first marriages usually consist of assets transferring to one’s spouse upon death, and then to their common children. This is where planning for the blended family differs. Using the Brady Bunch example, if Mike transfers all of his assets to Carol upon his death, he may unintentionally disinherit his three boys, as Carol has no legal obligation to support or provide an inheritance for Greg, Peter and Bobby. Carol may remarry. And, depending on how long Carol lives, a majority of their inheritance (including life insurance proceeds from Mike’s first wife, which was intended to reach her children eventually) could be depleted during Carol’s lifetime.

There are several ways Mike can safeguard his assets to ensure that his children’s inheritance is preserved. One such option is to use a Marital Property Agreement, by which Mike and Carol agree to give up some or all of their right to the other’s assets, thereby protecting the assets for their children. Mike could also create a Qualified Terminable Interest Property (QTIP) Trust. This trust would give Carol some access to the funds during her lifetime, but would ensure that, upon her death, the assets pass to Mike’s children.

Another way to protect assets is to create Agreements of Reciprocity whereby Mike and Carol choose to name each other as primary beneficiary of each other’s assets, with all six children as contingent beneficiary. The Agreement of Reciprocity states that they both agree not to change the terms of Wills, Trusts, beneficiary designations or make lifetime gifts in any way that would change the distribution terms from what was agreed upon at the time the estate plans were put in place.

Mike and Carol should also consider what happens if one or both of them pass away before all children have reached age 18. They need to consider who would be Guardian and Conservator for any minors. They may also consider creating a trust for the benefit of the children, naming an independent trustee who would manage the funds to ensure that they were properly used. The trust would also keep the children from having full access to, and possibly squandering, their share of the assets upon their eighteenth birthdays.

The couple also needs to plan for possible incapacity. If one or both of them is unable to make his or her own financial and health care decisions, they will want updated health care directives and durable powers of attorney in place.

When you are lucky enough to meet a person to merge families and continue life with, make sure you are prepared for whatever the future may bring. Consult with your Estate Planning attorney for more complete information on these and other strategies in planning for your blended family. This information is not intended to be complete, so do not make decisions based on this article without having your attorney evaluate your specific situation.


questions about this topic?

For more information, please contact Katie Kranz at 651.351.2139, kkranz@eckberglammers.com or Shannon Hooley Enright at 651.351.2111, senright@eckberglammers.com.