In the United States, the divorce rate has hovered around 50 percent for some time now. Consequently, blended families that result from second (or subsequent) marriages have all but become the norm in the U.S. While estate planning is important for anyone with a family, it takes on a heightened importance if you are part of a blended family. The Waukegan estate planning attorneys at Hedeker Law, Ltd. offers some tips to help you with your estate plan if you are part of a blended family.
Estate Planning Concerns for the Blended Family
Before divorce became commonplace, traditional estate planning typically dictated that married spouses create reciprocal estate plans that included terms which left their entire estate to the surviving spouse. That way, if the husband passed away first, the entire estate was left to the wife and upon her death, the estate assets were distributed among the couples’ children. Conversely, if the wife was the first to die, any assets she owned were left to the husband and upon his death, all their combined assets were distributed to the children. Other aspects of estate planning were also less complicated. For example, beneficiary designations and fiduciary roles rarely needed to be updated. There was also less concern about who would make decisions in the event of incapacity as well as who would plan and oversee funeral and burial arrangements. When a blended family is involved, however, the waters become murky and the need for a comprehensive and current estate plan increases dramatically.
Tips for Creating Your Blended Family Estate Plan
Estate planning for a blended family actually starts when you get divorced. At that point, you need to update your current estate plan to reflect that fact that you are divorced. Among other things, that typically means:
- Changing the Executor of your Last Will and Testament and the Trustee of a trust if you have one.
- Updating the terms of your Will to reflect the fact that you are no longer married.
- Changing beneficiary designations on life insurance policies, retirement accounts, financial accounts, and any other assets that include beneficiaries.
- Updating advance directives and powers of attorney by appointing a new Agent.
- Updating other estate planning components, such as a funeral and burial component, to ensure that your now ex-spouse is not still listed as a beneficiary, fiduciary, or agent.
Once you are remarried, you will need to update your estate plan once again to include your new spouse and any step-children if you so choose. One common concern people have when they remarry is how to provide for a new spouse while still protecting assets meant for children from a previous marriage. One excellent estate planning tool that is frequently used to accomplish both goals is a Qualified Terminable Interest Property trust, or QTIP.
A QTIP trust operates in basically the same way as any other trust with some special terms designed to provide for your spouse while protecting your children’s inheritance. You will need to appoint a Trustee to oversee the administration of the trust and to manage the trust assets. Assets transferred into the QTIP trust are not actually gifted to your current spouse when you die. Instead, your spouse receives income from the trust assets but cannot withdraw the principal from the trust nor can he or she decide on the ultimate disposition of the trust assets. In the case of real property, your surviving spouse may also receive a “life estate” in the property, meaning that he or she may remain in the home until death, but will never own the property outright. When your surviving spouse dies all assets held in the trust are then transferred to the intended QTIP trust beneficiaries, typically your children from a previous marriage.
Contact Waukegan Estate Planning Attorneys
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding estate planning for a blended family, or you wish to get started updating your current estate plan to include your new blended family, contact the experienced Waukegan estate planning attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.
- How Can I Terminate a Living Trust? - September 24, 2019
- Is an AB Trust Right for My Estate Plan? - September 12, 2019
- How Can I Include Philanthropy in My Estate Plan? - September 4, 2019