Why estate planning is important for blended families
Far too many people put off estate planning until it’s too late. Some of these people simply don’t see any urgency in creating an estate plan, while others may be fearful of confronting their own mortality. In the vast majority of these situations, though, individuals think that they don’t need an estate plan because they just want their assets to be left to their spouse and their children. But even this seemingly simple desire can have profound complications, especially if you’re part of a blended family.
Why estate planning in a blended family is important
Proper estate planning is important for those who are in a blended family for a number of reasons. One of the biggest is for appropriate distribution of estate assets. Absent an estate plan, your spouse will inherit half of your community property, meaning property that was acquired during your marriage, while your children will inherit the other half. Your spouse would then inherit one-third of your personal property for use during his or her life, with that portion being distributed to your children upon your spouse’s passing. Your children then inherit the other two-thirds of your personal property.
Why is that problematic? This intestate succession can be problematic if it doesn’t suit your wishes. For example, if you wanted your children from another relationship to eventually inherit your half of the community property, then your wishes are put at risk by intestate succession laws.
This is because your spouse is under no obligation to leave the half of the estate that he or she inherited from you to your children. Your children could be essentially prevented from inheriting half of your community property estate. Over time your spouse may lose connection with your children from another relationship, or your spouse may remarry and change their priorities.
Also, you might have other ideas for who will inherit your estate. This may include leaving assets to grandchildren, close family friends, your parents, other close relatives or even a charitable organization. All of this can be jeopardized by intestate succession and your spouse who is not as closely connected to those whom you want to inherit.
What can you do to ensure that your wishes are fulfilled?
Although this can be a stressful prospect, the good news is that there are estate planning vehicles out there that can help you avoid any unwanted consequences in the estate distribution process. One commonly utilized option is the remainder trust. This allows you to leave assets to your spouse while specifying where those assets will go once your spouse passes away. This way, you can support your spouse while still ensuring that your other loved ones will receive the financial resources that you want them to inherit.
You can also make sure that you revisit your beneficiary designations on certain accounts, as those will be paid out directly to those named individuals upon your passing. This can be an efficient way to ensure that those assets are distributed in accordance with your wishes.
Create the estate plan that is right for you
The estate planning process can be confusing, primarily because there are so many options. That’s why knowledge is power when it comes to estate planning.