Preparing an estate plan requires careful consideration of your goals and family dynamics. The failure to create a tailor-made estate plan can have significant unintentional consequences, especially for blended families.
Often considered the central document to any estate plan, a last will and testament frequently is used as the primary planning vehicle. Although a will is important, it does impose certain limitations, particularly for blended families. There are a few common estate planning strategies that often end up in misfortune.
First, spouses may choose simply to leave everything to each other as the primary beneficiary with all children as the contingent beneficiaries. This is created with the expectation that upon the death of the first spouse, the second spouse will be able to use the property to live, but then will distribute it equally between all the children.
The primary problem with this plan in a blended family is wills can be changed at any time before death, so long as the testator (the person making the will) has mental capacity.
When the first spouse dies, the surviving spouse may not remain as close with his or her stepchildren. Small irritations which were overlooked during the lifetime of the spouse who died may become outright disputes.
Stepchildren may not have a strong connection with the surviving spouse, particularly in marriages that occurred after the children were adults. Their mutual grief also can create distance rather than drawing them together.
Further, there also may be someone exerting influence over the surviving spouse, who pressures him or her to make drastic changes to the will. These changes often include the complete removal of the decedent’s children, leaving only the children of the surviving spouse.
Second, couples may choose to name different successor beneficiaries from one another. For example, the husband may choose to name his wife first, then only his children in his will, while the wife names her husband, then only her children in her will.
Unfortunately, this setup creates a survival race. Upon the death of the first spouse, the surviving spouse simply receives the property. Only the survivor’s beneficiaries ultimately matter.
Third, some couples will choose to use a trust for property distribution upon death. Trusts are certainly a stronger vehicle with more options for planning. However, if not used properly, a trust can be just as detrimental to a blended family.
Trust provisions generally can be categorized according to the level of control the surviving spouse has after the first spouse’s death. Strong trust provisions can be included which lock down half of the trust assets upon the death of the first spouse. The surviving spouse remains a beneficiary of the assets but has no power to change the ultimate distribution of the decedent’s “half.” This allows for the continued financial support of the survivor, in addition to allowing flexibility for the survivor to change beneficiaries as far as his or her remaining share.
When preparing an estate plan for a blended family, carefully consider the relationships between each of the family members. If you are concerned about the potential deterioration of a relationship or of a surviving spouse changing beneficiaries, you may need to use a stronger planning technique than a will.