Today, second marriages have created a diverse family lifestyle blending newly born and existing step-children under a single roof. As life gets busy, the lack of having an estate plan or not updating an existing one to include the new spouse and children is common. So are the problems connected to the distribution of assets at the time of death.
Estate planning is a mix of family and legal obligations, filled with emotions and final wishes. The task is challenging as blended families deal with property partnerships and state laws on the proper roles of the surviving family members.
In most states, when one spouse dies, assets are passed to the surviving spouse. When the surviving spouse dies, assets pass on to the biological or legally adopted children. In the event, there is no estate plan or documented will, the state will intervene.
Many individuals and adult family members misunderstand the function of a comprehensive estate plan compared to a will. Assets under a will must go through your state’s probate process before distribution to the recognized heirs. Sometimes the probate court will allow excluded heirs to seek their share of the estate. Because state processes vary, it can take several years and involve costly legal fees and court expenses.
It’s possible to avoid probate with the help of an estate planning attorney. Start by having a complete evaluation of the state’s laws and procedures to properly draft and update your plan regularly.
Blended families need to configure the plan to support its future needs. Multiple trusts are one method of providing for the living spouse and all the children. A joint trust (A) will hold community property owned jointly between the two spouses from this blended family union. On the death of the first spouse, (A) assets are split into the two sub-trusts (B) and (C). Both B and C trusts accounts continue to provide for the living spouse until their death.
In some cases, spouses have preowned assets. This method allows the preowned holdings to be held in one of the sub-trusts accounts with its own trustee and specific beneficiaries. It assures the children of both parents receive their fair share of the assets.
As a parent, you’ve spent your life caring for your children. By having a plan in place, you continue to protect the assets and ensure who, when and how the assets are distributed. Included in the plan will be your instructions of who you want to assign to be your power of attorney, in charge of your trust’s responsibilities, and guardians for your minor children.
Did you know that some assets like life insurance, IRAs, 401 (k)s and annuities require a valid beneficiary before transfer of the account ownership is possible? If there’s a minor beneficiary, guardianship is necessary until the child becomes an adult. Outdated information or lack of information will delay distributions or trigger tax consequences.
Working with an estate planning attorney helps to reduce the difficulties. They assist in organizing the estate asset records, property titles, insurance policies and updating the beneficiary designations.
Don’t attempt to do this on your own, instead, allow an experienced attorney who understands family law and your state’s limitations to ease your worries.
You’ve worked and planned a lifetime, don’t get caught off guard.
Losing a loved one is difficult for those left behind. Advanced planning allows your family to grieve and move on. Is it time to update your plan? Are you ready to start developing a plan that changes with your financial situation? Contact us at (301) 610-0055 or (561) 290-2179 to schedule an appointment.