For most couples in a first marriage with no children from other relationships, estate planning is a relatively uncomplicated process, particularly if the marriage is long-standing, the couple has amassed most assets jointly, and the children of the marriage are grown and do not have the need for creditor protection planning. By contrast, individuals who are in a second or third marriage who have children from prior relationships (and sometimes with the current spouse as well) can present greater challenges and require more careful analysis and planning. These familial situations are often referred to as “blended families”. This article discusses several mutual goals of married couples who are planning for blended families and provides planning tips to ensure that a client’s goals are honored.
Goals: Perhaps the most important goal of married couples of blended families is to agree on the intended distribution of the estate following the death of the first spouse and upon the surviving spouse’s death. In most cases, each spouse will want to ensure the other spouse is taken care of for his or her lifetime and that the children from prior marriages (as well as of the current marriage) will receive some portion of their parent’s estate. While these goals may appear to be easily achievable, the discussion of money and property interest among spouses in a blended family situation can create a wide range of emotions. An experienced estate planning attorney (such as the attorneys at Midgett Preti Olansen) knows the right questions to ask in an effort to gain a clear understanding of the family dynamics. For example, it is important to understand the relationships between the current spouse and the children from the prior relationship as well as the relationships among the step-siblings, to anticipate how those relationships may change upon the death of the parent of the children from the prior relationship, and to address the possibility of a contest of the estate plan following the first or second spouse’s death in order to plan effectively for the blended family.
Planning: Once the couple has identified their goals, it is then important to identify each asset comprising the couple’s estate and determine how much of the estate should be preserved for the surviving spouse for his or her lifetime and in what context. Consideration should be given to the following options: an outright distribution of the estate to the surviving spouse and acknowledgment that the surviving spouse has no obligation to provide for the children of the prior relationship, establishment of a trust for the surviving spouse’s benefit for his or her lifetime with a distribution to the children upon the spouse’s death, establishment of beneficiary designations for specific assets to provide for the spouse and separately for the children after consideration of income and estate tax consequences, and the establishment of a pre- or post-marital agreement to bind the spouses.
It is also important to consider the difference in ages of the spouses in a blended family. If there is a large age gap, there is the possibility that the children from the older spouse’s prior marriage will not receive an inheritance from their parent’s estate until the death of the much younger spouse – and that could be an unintended consequence of the planning.
Additionally, it is very important to coordinate the planning with the titling of the assets as between the couple and beneficiary designations that are in place. If these matters are not properly assessed, the planning can be derailed and result in unexpected consequences.
Preparing for a Feud: Occasionally, regardless of the efforts expended by the couple to have a “perfect” estate plan in place for their blended family, litigation can ensue. One option to deflect a contest is to include a “no contest” clause in the plan. This concept is fairly simple – if a beneficiary contests a plan on certain grounds and loses, he or she risks losing the very inheritance the parent intended for the beneficiary to receive. While a no contest clause is not always effective to forestall potential claims, it is a concept that should be considered. Additionally, couples should consider re-executing their estate plans from time to time to establish continuity of what they want to achieve. This can deter a potential litigant because he would have to contest multiple documents executed at various times that reiterate the couples’ goals. The best approach to planning for couples planning for blended families is to communicate with all intended beneficiaries as to what the goals and intentions are in the event of an incapacity or death. Communication while the couple is alive and competent can help reduce or eliminate surprises and negative emotions that can lead to estate contests.
The attorneys at Midgett Preti Olansen are experienced at planning for blended families. We provide guidance on how to balance competing interests while maintaining family harmony in order to provide the client with peace of mind and a true sense of satisfaction in estate planning.