Today, blended families (second marriages, multiple sets of children, etc.) are increasingly common. In fact, blended families are beginning to outnumber traditional families and almost 2,100 blended families form in the United States every day. At the same time, over 29 million parents in the U.S. are also parents to stepchildren.
Blended families can present complicated and emotional challenges when it comes to end-of-life planning and wealth transfer. There are steps, however, that can be taken to mitigate these challenges. A comprehensive tax and estate plan is essential to make sure that a surviving spouse, as well as the next generation, are taken care of and wealth is preserved. A well-rounded team of advisors (e.g., estate planning attorney, financial advisor, and accountant) will be instrumental in creating and implementing this plan.
Often, an individual with a blended family must be very thoughtful and deliberate in his or her approach to estate planning. A basic will, for example, may leave a surviving spouse with great freedom and control over assets. In this scenario, there is greater potential for conflict between the surviving spouse and non-biological children. Additionally, with a basic will, there is a chance of some beneficiaries being unintentionally left out of an inheritance.
Trusts can give a clear understanding of the division of assets after a grantor’s death while also caring for a surviving spouse and children separately and lessening any tension between family members. QTIP, life insurance, joint revocable, and bypass trusts are a few examples of planning tools that may help blended families. Trusts have the added benefit of helping to protect family members from other potential issues like divorce, creditor protection, and poor fiscal management. When using a trust strategy, blended families must consider who will serve in the role of trustee. A corporate trustee or co-trustee can remain unbiased as a neutral third-party to help prevent disagreements and discord among family members if delicate family dynamics are involved.
Advisors may also counsel blended families on strategies to ease the stress that may come along with end-of-life planning. Communication is vital to keeping the peace between family members (blended or not). Generally, the older generation should seek to be transparent and inform all sets of children of their estate plan. All beneficiaries should have a basic understanding of how any inheritance will work. Through open communication, a grantor or couple will set expectations for all parties involved and ease potential conflicts that may arise when one spouse passes away.
Every family is different. It is important to consult an estate planning professional who can help you develop a strategy for your estate plan that is right for you and your family. Blended families in particular need a customized plan and strategy in place to preserve family harmony and avoid family conflict. A blended family should utilize a team of trusted advisors to get to know their family members and their unique circumstances. Cumberland Trust, as corporate trustee, along with your chosen team of professional advisors, will work together to ensure your plan is tailored to your needs and your family’s wealth and legacy are preserved.