Updated March 29, 2022 by Daniel H. Ruttenberg
Estate planning for a blended family can have unique challenges. Of particular concern: taking care of your children from previous relationships after you’re gone, while also providing for your new spouse. So how do you protect both?
Estate planning strategies
Leave Everything to Your New Spouse
The concern: If you leave all your assets to your spouse, are you sure they will provide for your children? The surviving spouse is now in charge of all the inherited assets and may put his or her kids first. Or worse, what if the surviving spouse marries again–adding more complications?
Estate planning principal Dan Ruttenberg says “leaving all of your assets to your new spouse can be a risk because those assets may never make it to your children.”
Leave Everything to Your Children
The concern: If you leave all the assets to your children, your spouse might have a dramatically negative change in lifestyle upon your death.
“Split the baby”
Instead of leaving everything to your spouse, you can “split the baby.” With this method “some assets are left to your spouse and some assets are left to your children,” says Ruttenberg.
Leave assets in a trust
Leaving your assets in a trust for your spouse is the most common solution. “While those assets are in a trust, your new spouse can receive income and even have access to principal,” says Ruttenberg. However, your children will receive what is leftover at the end.
Creating an estate plan for your family will help protect everyone advises Ruttenberg. The above solutions have advantages and disadvantages. What’s right for you will depend on your specific circumstances.
Estate planning techniques to minimize family conflict
Today, it’s not unusual for a family to include children from prior marriages. These “blended” families can create estate planning complications that may lead to challenges in the courts after your death.
Fortunately, you can reduce the chances of family squabbles by using estate planning techniques designed to preserve wealth for your heirs in the manner you want, with a minimum of estate tax erosion, if any. Here are four examples:
Will
Your will generally determines who gets what, when, where and how. It may be combined with “inter vivos trusts” established during your lifetime or be used to create testamentary trusts, or both.
While you can include a few tweaks for your blended family through a codicil to the will, if the intended changes are substantive — such as removing an ex-spouse and adding a new spouse — you should meet with your estate planning attorney to have a new will prepared.
Living trust
The problem with a will is that it has to pass through probate. In some states, this can be a costly and time-consuming process. Further, since a will is of no effect prior to your death, it does not allow for structuring your assets in advance.
Alternatively, you might transfer assets to a living trust and designate members of your blended family as beneficiaries. Unlike with a will, these assets are exempt from probate.
With a revocable living trust, the most common version, you retain the right to change beneficiaries and distribution amounts. Typically, a living trust is viewed as a supplement to — not a replacement for — a basic will.
Prenuptial agreement
Generally, a “prenup” executed before marriage defines which assets are characterized as the separate property of one spouse or community property of both spouses upon divorce or death. As such, prenuptial agreements are often used to preserve wealth for the children of a first marriage before an individual enters into a second union.
It may also include other directives, such as estate tax elections, that would occur if the marriage dissolved.
Your attorney can advise you on your state law concerning the validity of your prenup.
Marital trust
This type of a trust can be customized to meet the needs of blended families. It can provide income for the surviving spouse and preserve the principal for the deceased spouse’s designated beneficiaries, who may be the children of prior relationships.
If certain tax elections are made, estate tax that is due at the first death can be postponed until the death of the surviving spouse.
These are just four estate planning strategies that could prove helpful for blended families. You might use others, or variations on these themes, for your personal situation. Contact us to develop a comprehensive plan.
About the Author
Daniel H. Ruttenberg
Daniel H. Ruttenberg, JD, CPA, LLM is a principal with the firm. Mr. Ruttenberg received his Bachelor of Science degree with a double major in Accounting and Finance from the University of Maryland. He earned his Juris Doctor with Honors from George Mason University School of Law and his Master of Laws in Taxation with Distinction from Georgetown University Law Center. Mr. Ruttenberg also served as the Director of the Fairfax Bar Association (FBA) for seven years. During this period, he was also elected president – the youngest in FBA history and served as a member of the Board of Directors for the Fairfax Law Foundation.
