A blended family can be one of life’s chief joys. But unfortunately, many people marry (or re-marry) without ever taking the time to assess their estate plans and update them, which, given the enormity of the legal change, is almost certainly necessary. Estate plans can get complex in any case, but where blended families are concerned, things have a way of getting downright messy.
While the law has long established lines of inheritance (through hundreds of years of common law) favoring traditional Western family roles and concepts, it doesn’t do a great job of taking blended family situations into account. For example, stepchildren are not automatically included in an inheritance even if they’ve been raised as the decedent’s own child. Similarly, if everything is left to a surviving spouse (whether by will, trust or beneficiary designation), the spouse is not required to leave anything to the deceased spouse’s children.
All of this to say: it is vital to wade into the details and be utterly thorough when creating an estate plan for your blended family. When done right, you make certain that every family member is cared for to the degree and in the ways that you feel is best. And one way to contend with such details is by using trusts.
Trusts can have several different features to help accomplish the goals of caring for the blended family. But first, what is a trust? It is simply a legal entity that owns assets. Most trusts are created during your lifetime by signing a legal document establishing the trust. When you create a trust, you can use language to ensure your goals are accomplished after you are gone. Here are a few examples:
A trust can set aside a portion of the assets in the trust to pass directly to your surviving spouse to use as he or she pleases. Alternatively, you can set instructions on how and when assets are to be used, which are carried out by a trustee. If you select the latter, meaning to have someone hold and manage assets for your spouse, you can also direct that everything left at the surviving spouse’s death will go to the children of the family.
When there are multiple young children, it is also possible to designate a portion of the trust assets to be held in a common pot trust. This type of trust can be distributed based on the needs of each child: in other words, the way you take care of your children now. Then, when the children are a bit older, the trustee is instructed to divide the common pot into separate shares for each child.
Trusts are not the only method to prepare your estate to benefit your blended family, but you need to consider the issues and options.
If you have a blended family or other family of choice, you need to visit a local estate planning and elder law attorney. Estate planning can be complicated, considering legal and financial issues, taxes, family dynamics, and the family legacy you want to leave behind. I would recommend a firm that dedicates significant time and energy to this specific practice of law.