We’re looking at estate planning for blended families in our latest article. Over 50% of marriages end in divorce today, and blended families are becoming more and more common. So much so, in fact, that they are no longer regarded as unusual. So it makes sense to take a look at some tips for blended families to help structure estate planning fairly for all parties.
Often a blended family will be the result of a second marriage or children from a previous relationship coming together. This in itself can be hugely challenging, but as a blended family, you will need to put in place a suitable estate plan that is fair to all.
What are the 3 main issues common with a blended family?
Estate planning for blended families is more complex than it would be for a family where there are no stepchildren. Here are those issues, and our tips for dealing with them:
How to protect inheritance from stepchildren
You could expect that a couple would typically set up a mirror will. Essentially, each person writes the same will and leaves everything to their spouse. When the second spouse dies, the will is executed and everything is left according to the wishes of both parties. In the case of a blended family, if mirror wills are put in place, there is nothing stopping the surviving spouse from writing a new will and excluding your children in favour of their own. They may even remarry, and their new stepchildren could inherit your assets, at the expense of your children.
This scenario is known as sideways disinheritance, where inheritance steps sideways and doesn’t pass along to the next generation. Being mindful of this and putting the right structure in place will mitigate this risk.
Choosing the right guardians for each of your children
In a traditional family where both adults are also both parents, the choices to make should something happen to you both are probably more straightforward. It’s probable that you will appoint guardians in your will who will look after all of your children. In this case, estate planning for blended families becomes more complex. Let’s say that you have four children, two each from a previous marriage. Both of the other parents are still alive and take part in parenting.
The other parent is unlikely to accept a guardian partly chosen by your spouse. Why would they? they are unlikely to know who they are. And in the event of your death, it’s reasonable for your children to return to them. If that parent is distant, takes little or no part in your children’s upbringing, or has been abusive, for example, this may make matters different. You may name your spouse as guardian. In this regard estate planning for blended families can be extremely challenging.
Protecting your assets
It’s not just your children where estate planning for blended families can be challenging. There are other considerations. Do you own a business, for example? If you die and your surviving spouse changes her will, control of your business could be passed to someone who you would have no intention of leaving in control.
Perhaps a stepchild or other relative who has poor financial control, or doesn’t have the right skills to take on your business. It could even be that you don’t want your children to inherit your business, but your surviving spouse decides to take that course of action in their own will. And changes could be made to how your assets are divided, and who the beneficiaries are. Any cash assets like life insurance, property, or treasured items may not reach the people you had instructed.
Estate Planning tips for blended families
There are a lot of considerations when considering estate planning for blended families. We’re looking at two key tips that will help you to understand the whole process.
Understand the risks and have honest conversations
We’ve looked at the main issues that set estate planning for blended families apart from a simple will. Those issues include guardianship, sideways disinheritance, and asset protection. There are others, and it’s important to take professional advice. But first and foremost, you and your spouse need to have an honest conversation about the risks, what you both want to happen to your assets after your death, and who your chosen beneficiaries will be. If you can have that conversation successfully and understand the risks to achieve your shared and individual aims, you’re halfway there.
Always, Always, Always take Professional Advice
This isn’t a sales pitch. Not one bit. There are structures that you can put in place that can help you and your spouse to achieve your aims and ensure that your wishes are carried out. Trusts and bloodline wills, for example, are two options that you could consider. In the case of trusts, there are hundreds to choose from, and particular rules to follow to set them up correctly. Get it wrong, and your will could be challenged through the courts. An estate planning consultant can help you to bring clarity to your plans, and provide you with advice and options. They will have the specialist knowledge that you need to construct effective documentation.
How is Estate Planning Different For Blended Families?
The real difference is the complexity of relationships in your blended family. Bringing together children from previous relationships brings a whole new dynamic. And that means a different set of risks to consider. It’s not only the children to consider either. You may have grandchildren now, or in the future too. With more complex relationships come more complex requirements in your will. Estate planning for blended families should consider these relationships, your own wishes, and the best structure to deliver it.
That in itself isn’t different from more conventional family arrangements, but the greater risk of failure is. Get it wrong, and as we’ve described already, your wishes could be overridden and your own children and other beneficiaries could be excluded.
Consider this scenario. You die and leave your share of your home to your spouse and children. Your wish is for your spouse to live in your home until they die, at which time your home passes equally to your children and your stepchildren. Your spouse remarries sometime later. You had a mirror will in place. Your spouse writes a new mirror will with their new spouse. In that will your assets are shared between your children and beneficiaries, your spouse’s children and beneficiaries, and your spouse’s children. Your spouse dies. Everything goes to the surviving partner to be shared with everyone on that person’s death.
The surviving spouse writes a new will leaving everything to their children. Your children, your stepchildren, and all of your wishes, and those of your spouse are disregarded.
So not only are your final wishes not carried out, but your children get nothing, and your assets are left to the children of someone who you never met, and whose children you never met. And it’s all perfectly legal. This is the difference between estate planning for blended families and more conventional arrangements. So, as already described, putting in place the right structure to protect your assets from these complex risks is crucial.
How Do You Structure A Will In A Blended Family?
Is there a typical will for a blended family? Well no. There isn’t really a typical will for anyone, but effective estate planning for blended families means being innovative in the approach to finding solutions to complex challenges. We’ve looked at one possible scenario above, and described in brief trusts and bloodline wills already. Trusts are a highly effective solution that ensures that your assets are passed along to your beneficiaries in a way that reduces the risks that we have already described. Essentially a trust ring fences your assets and is managed by the trustees that you choose.
They are bound by the terms of the trust and must act according to those instructions. The law is very clear, and the duty of care that a trustee is responsible, jointly and severally, to deliver on behalf of the trust, is laid out in Section 1 of the Trustee Act 2000.
Your estate planning consultant will recommend a suitable trust and work with you to include the assets you wish to place in it, who should benefit upon your death, and who you would like to choose as trustees.
We described Bloodline Wills earlier in this article. These essentially ensure that your wishes are carried out along your bloodline. So not only does this type of will protect your children, but it continues along your bloodline. So future generations are protected from divorce, blended families, and even relatives who may not have the financial acumen that you would hope for. Estate planning for blended families isn’t an “out of the box” solution, there are no such things as typical wills for blended families, so it’s impossible to provide complete examples of the structure of your will. That’s why we’ve provided scenarios to consider.
Every will is different, irrespective of whether it’s written for a blended family or not, so it’s best to have the conversation with your spouse and then consult a professional together.
Will Protect is here to help!
Our estate planning consultants are here to help you work through the estate planning for blended families with you. We understand that this is a difficult conversation to have both with your spouse, and with our team, and we’ll take all the time that you need to work through the complexities of ensuring that your final wishes are protected, and carried out. It’s not about anyone doing something that they shouldn’t. Wills are usually written in good faith. It’s simply a lack of knowledge that leads to problems in the future.
We’re very aware of that fact, and the risks and challenges involved, so our role is as much about helping you to understand that as it is putting in place robust, effective structures to ensure that your future generations benefit from your hard work and successes. Contact us today to arrange an initial consultation
