Most people do not relish the thought of planning for their own death. Estate planning for blended families can be even more complex than it is for others, so you’ll want to start thinking about this early on. It’s never too late to start protecting your family, no matter what your unique family looks like.
How can you ensure that everyone is protected and provided for when you are no longer around? Here are some of our best tips to help you establish a trust that carries out your wishes.
What Counts as a Blended Family?
Blended families are more common today than ever before, but does this description apply to your unique family structure? This term typically means you are a married couple with children from previous marriages or relationships. Some of the children in your home may be biological, but you do not want to forget the importance of your stepchildren.
This structure may include half-siblings and any extended family members who reside with you.
Why is Estate Planning for Blended Families Different?
For the most part, you will find that estate planning is not so different for blended families. The tricky part is navigating to incorporate more people into your long-term vision and plan. You and your spouse will have to be on the same page about how you will take care of each family member you want to include in your financial legacy.
This can be particularly tricky when the issue of fairness arises. Instead of leaving your entire estate to your spouse upon your passing, you might need to carve out provisions for children from previous marriages so that all kids benefit and there are no points of contention years after you are gone.
No matter your family makeup, estate planning has a lot of financial benefits. It’s good to start the conversation early and consider your options, even if you don’t hammer everything out right away.
Trusts for Blended Families
If you want to ensure that everyone is taken care of after your death, a family protection trust is one potential option for you. Like most trusts, it removes assets from your taxable estate and shields them from future issues with creditors or lawsuit settlements. The trust will be granted to a trustee who manages it in your absence. In many cases, you might appoint your spouse or another family member as the trustee.
When you set up the trust, you will put guidelines in place for how the resources and assets will be spent. The trustee might have legal control over the trust, but your guiding hand ultimately doles out assets and money. This is a great way to ensure that the inheritance you leave to your family can last instead of allowing them to blow through an immediate windfall of cash.
It can be particularly useful if you have a special needs child or family member you want to take care of long-term. Private and public benefits are not at risk when you use a family protection trust.
More Tips for Estate Planning with Blended Families
In addition to smart estate planning, you have to consider more than just the initial setup of your trust. Consider these tips to help you make the most of your legacy.
Prepare Early
If you want to take great care of your family in a future without you in it, it pays to start preparing early. Plan ahead and put the structures in place to protect each one of your children and allocate your assets to them fairly. This is also a great time to decide on a power of attorney in case you encounter a situation when the unthinkable happens.
Consider Prenups
A good way to open the door to communication with your new spouse from the start is to set up a prenuptial agreement before your wedding day. This gives you both space to think about your goals for your new blended family and protects assets in the event of a divorce. This might not seem like something you want to broach, but it protects both spouses and their children from an earlier relationship. It may also serve to calm some of your children’s nervousness.
Create More than Just a Will
A will is a great starting point for your estate planning for your blended family, but it likely will not be enough to carry out the complex wishes inherent to a blended family. When you pass, your estate is typically left to a surviving spouse. If they were to pass away, the assets you left to them would be passed to their children, which could exclude your biological children from the legacy you intended to leave.This is why trusts are a crucial piece of your estate planning. You can still leave your assets to your spouse for their lifetime but then pass along a portion of the balance to your children after their passing.
Remember that beneficiaries usually take precedence over your will, so ensure that all documents align.
Review Regularly
Make sure you check in with your estate planning documents occasionally, especially after major life changes. You might find that your beneficiary designations need to change based on the life circumstances of your children, or you might want to make modifications to your will. Make sure that your current beneficiaries are accurate, even on old accounts.
When you do check in with your estate planning, make sure you discuss your goals with your spouse so that they know what your wishes are later if needed.
Start Your Planning Today with Magellan
Blended families can benefit from professional advice on structuring trusts and estate planning documents. Magellan has the experience you need and serves as your one-stop shop for all your estate, financial, legal, and tax planning needs. Let us help you establish a family protection trust that will provide for every member of your unique family today!
For a comprehensive review of your personal situation, always consult with a legal or tax advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
This material provided by Kevin Meaders was written by Axle Eight, a non-affiliate of Magellan Planning Group and Cetera Advisor Networks LLC.