Protecting Inheritances in a Blended Family

Blended families have estate planning challenges differing from traditional families, explains a recent article from The Record Courier, “Estate Planning for Blended Families.” A blended family is one where one or both partners have children from a prior marriage. A key concern is protecting inheritances in a blended family. The details vary, but the concern is the same: the possibility for the children to be disinherited if, after one spouse dies, the surviving spouse reduces or eliminates any provisions made for the deceased spouse’s children.

A well-drafted estate plan created by an experienced Austin estate planning attorney can address this issue to ensure that the deceased spouse’s children are protected and provided for after their parent’s death.

When creating the estate plan, consider what would happen if the surviving spouse remarried. This optimally frames the drafting process for the children. Parents should make provisions to protect them using several strategies.

A simple last will and testament or even a revocable trust with no provisions typically won’t be enough to address the complex needs of a blended family. That is, the goal of protecting inheritances in a blended family won't be achieved. When the first spouse dies, the surviving spouse remains free to change the terms of their will, which could disadvantage the deceased spouse’s children.

Designating an independent fiduciary can help ensure that the deceased spouse’s children have sufficient assets. The independent fiduciary can protect the children’s interests with no risk of self-dealing. An oversight by an independent fiduciary also minimizes the chances of conflict between children and stepparents.

A properly designed estate plan protects the children of both parents, regardless of which spouse dies first. One commonly-used strategy to protect inheritances in a blended family is to create a trust leaving the assets to the surviving spouse during the spouse’s lifetime but then passing the remaining assets to the deceased spouse’s children.

Another option is to divide the estate upon the first spouse’s death, with half the estate protected for the deceased spouse’s children. This is applicable if the two partners bring assets of equal size to the marriage. The surviving spouse has access to those assets for specific needs. However, you can put limitations into place.

In some cases, the strategy to ensure that children receive the assets intended for them upon their parent’s death is to leave them to the children outside of the trust, passing them directly by naming them as designated beneficiaries on select accounts or life insurance policies.

If the children are minors, creating a separate trust may be an optimal means of protecting their inheritance.

A premarital or post-nuptial agreement clarifies the rights and responsibilities of each spouse during the marriage. It also specifies the children’s living situation and expenses and requires assets to be used to maintain their standard of living.

With mindful and comprehensive estate planning, couples can leave a financial legacy for all of their children while still providing for surviving spouses.

Reference: The Record Courier (March 12, 2023) “Estate Planning for Blended Families”