The Brady Bunch was one of the first famous blended families. Mike had three boys of his ownGreg, Peter, and Bobbyand Carol had three girlsMarsha, Jan, and Cindy. Mike and Carol married and the 6 children came together to make one, big, new family: a blended family.
A blended family is a step-family. It is a family that includes children from a previous relationship of one or both spouses. Estate planning for a blended family can be a tricky balancing act between the interests of the new spouse and family and the interests of the children from a previous relationship. The following are a few examples of unintended outcomes that can happen in a blended family situation.
Leave It All To Spouse – This often occurs through what is known as an “I Love You Will.” In an “I Love You Will” one spouse leaves everything to the other spouse. In some instances this works just fine, but with a blended family it may cause problems.
In the Brady Bunch example, if Mike passes away and leaves everything to Carol in his Will, Carol can spend this inheritance any way she wants. This is great for Carol and the girls. Carol can leave this money to anyone she chooses in her own estate plan. In all likelihood, Carol will leave everything to her children; Marsha, Jan, and Cindy. Mike may have thought that Carol would take care of Greg, Peter, and Bobby and provide for them in her estate plan. Even if Carol promised Mike that she would leave money to his boys, Carol is under no legal obligation to do so.
Possible Alternatives – Often times with blended families, a trust based estate plan is a common solution. Upon the death of the first spouse a special trust called a Marital Trust is established. This trust can ultimately protect the inheritance of the deceased spouse’s children. The Marital Trust has rules and restrictions on how the surviving spouse can access and spend the money.
Leave It All To Children – Leaving all of your assets to your children can have several unintended results. First, this could cause your surviving spouse to have insufficient resources to continue to live comfortably. If Mike left everything to his boys, Carol, a stay at home mother, may have a hard time supporting herself and her children.
Second, your children may be minors when you die. This means an adult has to manage their inheritance until they reach the legal age of majority, typically 18 years of age. Usually a court must appoint the adult that will manage the money and the court typically chooses the surviving biological parent for this job. This means your ex-spouse or ex-partner may end up controlling all of the assets you have left for your children.
Possible Alternatives – A revocable living trust based estate plan can prevent an ex-spouse from gaining control of your child’s inheritance. When you create a trust, you decide ahead of time who will be the trustee of the trust after your death. The trustee is the person that manages the assets on behalf of the beneficiaries, in this case the children. Planning with life insurance may also be a way to ensure that your new spouse and your children have sufficient resources available after your passing.
Planning Is Key With Blended Families – There are numerous financial and legal strategies available to help blended families achieve their estate planning goals. Knowing that blended families have unique obstacles in the planning process can help one navigate the common mistakes. Experienced legal counsel can help you create an estate plan that will both provide for and protect your new spouse and children.