For Blended Families
Planning for Blended Families in New York
Serving Clients in New York City and the New York Metropolitan Area
Whether due to the death of a spouse, as a result of divorce and remarriage, or the creation of a domestic partnership, including same-sex relationships, blended and non-traditional families now outnumber traditional nuclear families. Based on current statistics and trends, that number is likely to grow. Many blended families face unique challenges, and over 60% of second marriages and later life relationships end in divorce or termination.
If you already have an estate plan created when you were “previously” married or in a former relationship, we can help you bring it up-to-date to reflect your new life. Unfortunately, little attention has been paid to the critical estate planning challenges confronting blended families, including disinheriting your ex-spouse, protecting your own child(ren), and integrating stepchild(ren).
Without proper legal planning, your ex-spouse (as surviving parent/guardian) would likely be appointed by the probate court to manage the inheritance you leave to your minor child(ren). To make matters worse, what if your child(ren) later predeceases your ex-spouse, and die without a spouse or children? Who would inherit your assets then? That is right … your ex-spouse, as the next-of-kin of your child(ren). You need to create an alternate plan and make your wishes clear in your Last Will and Testament or Trust.
Chances are you made a few solemn promises to your new spouse on your wedding day. Among them were promises to be there through thick and thin, personally and financially. In the absence of a premarital agreement to maintain separate assets, most spouses in blended families tend to blend their wealth. For example, they title their respective assets in the names of both spouses and also designate one another as the primary beneficiary of their respective retirement plans and life insurance policies.
Warning: If you predecease your new spouse, this joint plan with your new spouse may forever disinherit your children from their share of such blended wealth! Upon the death of your new spouse, your assets may be inherited by your stepchildren, or even by your new spouse’s next spouse and their children. Another thing to consider is whether your children are ready to receive their inheritance upon your death. Yes, things can get complicated – and fast!
Regardless of whether children are reared in a traditional nuclear family or in a blended family, great care should be given to protect any inheritance both for and from them. Wealth representing a lifetime of your hard work and thrift can be lost very quickly. In addition to good old-fashioned spending, an inheritance can quickly vanish through divorces, lawsuits and bankruptcies.
Fortunately, with proper (and very careful) estate planning, you can both honor your vows to your new spouse/partner and provide an inheritance that is protected and distributed in accordance with your wishes.
Some Examples of Legal Planning Tools Are:
- Revocable Trust with marital assets going into a separate trust for your spouse
- IRA Conduit Trusts to name multiple beneficiaries, not a direct inheritance
- Trusts for children and grandchildren created in your will at your passing
- Life Estates for the marital home to protect your spouse but passes the renamed title to your debt
- Life Insurance planning to replace inheritance. If your estate is not large enough to both support your surviving spouse and give an inheritance to your own children, a life insurance policy pay out to the surviving spouse can add to your estate size and solve the dilemma
- Tax Issues and Capital Gains analysis need to be considered in dividing up assets among your heirs. Certain assets come with present or future tax implications and impact the inheritance value of these assets