Estate Planning for Blended Families | Montana Wills & Trusts ...

Tips & Techniques for the Modern Family

The idea of the ?typical? American family has changed significantly over the last several decades from the traditional nuclear family to blended families of countless variations. Now-a-days, a blended family, or a family where one or more spouse has children from a prior marriage is commonplace.

Blended families face unique challenges when it comes to estate planning. Parents of blended families should take extra precautions to adequately consider what would happen to the family upon the death of one spouse and take steps to avoid disinheriting a spouse or children.

Perhaps one of the more famous estate disputes in recent history surrounded the estate of J. Howard Marshall who was married to the much younger Vickie Lynn Marshall, more widely known as Anna Nicole Smith.? Upon Mr. Marshall?s death, his will left almost all of his estate to his son from a previous marriage. However, Ms. Marshall sued, claiming her elderly husband promised to give her more than $300 million and the court battle went on for several years.

This case illustrates one of the more common scenarios in blended families, where one spouse leaves everything to their children from a prior marriage and completely leaves out his or her spouse. This leaves the estate subject to claims from the surviving spouse, as well as other disputes between family members that can have lasting impacts.

Another common problem occurs when the children are disinherited by virtue of joint ownership of property.? This commonly occurs because married couples often decide to hold property such as houses, bank accounts, or cars jointly. However, in a family of a second marriage joint ownership with a spouse can result in unintended consequences. In the case of joint ownership, the surviving spouse obtains sole ownership of the property by operation of law, thereby excluding the predeceasing spouse?s children from ownership of the property.

If you have remarried and have children from a prior marriage, what can you to reduce the chance for disputes between your spouse and children after you are gone?

First, it is essential that you talk to your spouse and children about your wishes, as well as discuss potential issues that may arise with the distribution of your estate. In addition to communication with family members, a blended family should consider the following techniques for reducing conflicts:

Update your Estate Plan & Beneficiary Designations

At a minimum each spouse should have an estate plan containing a will with Powers of Attorney for finances and health care. However, a will only goes so far with a blended family. It is also critical that each spouse updates their estate plan and beneficiary designations to ensure that ex-spouses are disinherited or no longer listed as beneficiaries of assets such as retirement accounts or life insurance policies. Then review your beneficiary designations to make sure that the proper beneficiaries are named, and the beneficiary designations fit within your overall estate plan. Remember, a beneficiary designation trumps a will, so keeping your beneficiary designations updated to reflect your current life situation is essential.

Prenuptial or Other Marital Agreements

Perhaps one of the best methods of preventative maintenance for a blended family is to execute a prenuptial or other marital agreement with your spouse that addresses estate planning issues. By clearly defining which assets you want to remain separate after the marriage and which assets you agree will pass to each of your children you can reduce disputes later, Moreover, marital agreements allow you to maintain more control over the how and when your assets are distributed.

Life Insurance Policies

Life insurance can be a great tool for providing for your children, while also providing for your spouse. By specifically naming children as beneficiaries of a life insurance policy it creates immediate benefit to children upon death, rather than having to potentially wait many years for inheritance. With the life insurance proceeds going to children, the remainder of the estate may pass to the surviving spouse, thereby eliminating or reducing potential inequities.

Create a Trust

Consider a joint revocable living trust or Qualified Terminable Interest Property Trust ?QTIP? Trust. A QTIP or other trust can provide income and principal for a surviving spouse?s care during his or her lifetime. However, upon the death of your spouse, the remaining assets in the trust can be distributed to your children according to your wishes.

Life Estates

Another option to consider is to provide your spouse with a life estate in your home. ?A life estate allows a surviving spouse to live in the house for his or her lifetime, but allows the remainder interest in the home to pass to your children.

Talk with your Family & Seek Professional Advice if Necessary

These are just some of the techniques to consider when planning an estate with a blended family. It is critical that you and your family discuss these issues together and have an overall plan to addresses any potential disputes or inequity problems. Your particular estate may also have estate tax or other considerations, so I always recommend seeking the professional advice of your attorney, CPA or financial planner.

These types of estate planning issues may not always be easy issues to talk about, especially with a blended family. However, communication and planning now can provide peace of mind that you are sparing your family from conflicts or hurt feelings down the road.

Contact Kelly O?Brien for more information or questions about estate planning at? Measure, Sampsel, Sullivan & O?Brien, P.C. at (406) 752-6373/ www.measurelaw.com

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Source: http://www.mtwillsandtrusts.com/estate-planning-for-blended-families/

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