Why Blended Families Need an Estate Plan
Let’s imagine a couple meeting in their 50’s. They each have adult children from a prior marriage. They fall in love, they get married, buy a nice home on Lake Norman, and they just assume that everything will work out to pass their estates on to their respective children. Let’s assume they keep all their finances segregated during the marriage, assuming that they will each pass what they have to their own kids.
Fun fact – without very specific planning, not only does it not usually work out. It usually fails. I know. I’ve seen it first hand.
The Intestacy Trap for Blended Families
While most people assume that everything passes to their spouse automatically when they die, that is not the case. When a spouse in blended marriage dies without a will, the surviving spouse is often shocked to discover that his or her stepchildren have a claim to the deceased spouse’s estate. The surviving spouse learns quickly that even the marital residence may be subject to the children’s claims on the estate.
The other trap is that while the decedent spouse’s natural children have a claim to the estate, the stepchildren have no claim to a stepparent’s estate. This creates a very real tension between the surviving spouse, the natural children, and the stepchildren. The natural children have to assert their claims when their parent dies because they will have no claim when the surviving spouse dies. In short, it’s a mess.
Balancing the Interests
This core tension exists not only in intestacy, but in proper estate planning. Families with blended marriages have to consider balancing the desire to take care of the current spouse and the need to make sure the kids from the prior marriage don’t end up accidentally (or intentionally) disinherited.
This is where experienced estate planning using marital trusts comes in. Here at Walchesky Law, we can help you design a plan that provides for the surviving spouse during his or her life, while preserving the children’s right to inherit from their parent’s estate.
How to Plan for This
Often couples entering into a blended marriage write prenuptial or postnuptial agreements with details of how they intend to provide for each other and the children from prior marriages. Those documents can work with a proper estate plan, but they are not a substitute for a well-designed plan.
Additionally, couples should update beneficiary designations on life insurance policies, retirement accounts, and any transfer-on-death or payable-on-death accounts, as those will pass outside of any estate plan without careful planning.
The best way to plan for this is to start estate planning early. Even if it is your first marriage, a properly designed estate plan can provide for young children in the event of one of the spouses dies young and the other eventually remarries.
Another good idea is to name a neutral or professional executor or trustee in your estate plan if there is tension between a spouse and stepchildren.
The Elective Share Wrinkle
Let’s go back and assume that the blended couple we identified tried to do some estate planning with an online service. Let’s also assume that they decide “What’s mine is mine and what’s your’s is your’s” with the intent that each spouse would pass their estate on to their own children, with the surviving spouse planning to live off what they brought into the marriage and earned thereafter.
Under North Carolina law, a spouse has a right to claim a percentage of the decedent’s estate in the following percentages:
- 15% of the Total Net Assets if married for less than five years
- 25% of the Total Net Assets if married for at least five years but less than ten years
- 33% of the Total Net Assets if married for at least ten years but less than fifteen years
- 50% of the Total Net Assets if married for fifteen years or more.
As I mentioned, if relations sour between the children and the stepparent, the stepparent can undo the planning by claiming an elective share of the deceased spouse’s estate by as much as 50% of the total assets depending on the length of the marriage. Proper estate planning can ensure that assets pass as intended.
If You Have a Blended Family, Call Me for Planning
If you have a blended family and want to ensure an estate plan that works, schedule a 15 Minute Discovery Call with me to discuss your goals and how I can design a plan that protects your entire family.
Need to plan for a blended family?
Schedule a 15-Minute Discovery Call and ensure you have a proper plan.
Schedule a 15-Minute Discovery Call