Blended Families and Estate Planning
If you, or your significant other, have been through a divorce, the impact on how you plan your estate can be significant. The absolute worst thing you can do in this situation is nothing and hope your loved ones just “figure it out.” What if your ex-spouse comes out of nowhere and claims they are entitled to certain benefits? It’s happened before. Check out this article I published a few months ago about a Maryland case that involved such a fast pattern:
So what should you do? Well, a good first step is to review all of your current estate planning documents. This includes your will, durable power of attorney, insurance policies, any trusts, etc. A common mistake people make is not updating their documents and, suddenly, something happens and the relevant documents have outdated directives. For example, if you have a power of attorney naming your ex-spouse as the party empowered to make life and death decisions on your behalf. It is not only important to update your documents, but also review all beneficiary designations you may have. This includes any retirement accounts, life insurance policies, pensions with spousal/death benefits, etc. They all need to be updated with new designations after a divorce unless you want your ex spouse to get the benefits of these accounts.
If you have a new spouse it is essential to talk about your finances, goals for the future and how you want your assets to be distributed among your new spouse, children, family, etc. If you have adult-age children, you may also want to include them in these discussions so that everyone knows what to expect if you become disabled or when you pass away. I know these conversations can be difficult, but they have to be done. If everyone is one the same page, the smoother the process is in terms of administering your estate.
A major concern when I’ve counseled clients who have second marriages is ensuring that each spouse’s share of their estate ultimately ends up with their desired beneficiaries. In other words, if each spouse has children from previous marriages, the inheritance for each of those children is protected, even if their parent is the first one to pass on.
Using trust based planning allows a lot of flexibility in distributing assets. This can include instructions to take care of the surviving spouse, and still provide an inheritance to any other beneficiaries you wish to include. There are multiple ways to achieve these goals, and each is unique to an individual’s situation and planning goals.
When your family situation changes it is critical to sit down with an experienced estate planning attorney in your area and discuss your estate plan.