Blended families are increasingly common․ And in my experience‚ they present some of the most complex estate planning challenges‚ in terms of emotional variables and family dynamics․

This is what I see most often: a couple has been married for years and is deeply in love with each other․ They’re building a life together․ But they each came into the marriage with kids from a previous relationship․ And when they finally sit down and think about estate planning‚ the big question is‚ how do I take care of my spouse without shortchanging my kids?

The good news is that this is a solvable problem․ The bad news is that if you don’t have a plan in mind‚ the default plan could be painful 20 years from now – for your spouse‚ for your children‚ for your family’s relationships․

Here are the three biggest traps blended families fall into‚ and how to avoid them․ If you would like to start with a checklist of what a complete estate plan looks like‚ read what makes up a comprehensive estate plan in Tennessee.

Trap #1: Leaving Everything Outright to Your Spouse and Accidentally Disinheriting Your Children

This is the most heartbreaking mistake I see․ And it happens with the best of intentions.

In those circumstances‚ the husband gives everything outright to the wife‚ and that feels right because she’s his partner․ He wants her taken care of․ However‚ if his wife has children of her own‚ they will inherit the whole of her estate and his kids from the first marriage will receive nothing.

He never meant to disinherit them‚ he just never got around to structuring it properly․

The Solution: A QTIP Trust

This is where a QTIP trust comes in․ A Qualified Terminable Interest Property trust or QTIP trust allows you to provide for your spouse during their life but then stipulates that whatever is left in the trust passes to your kids after your spouse dies․

In simple terms‚ what it means is that upon your death your property will be transferred into a trust․ Your spouse will receive income from the trust‚ and‚ depending on how the trust is set up‚ may be able to access the principal for health‚ education, or support needs․ But‚ they cannot change the fact that when your spouse dies‚ your kids get what’s leftover․ Your spouse is provided for‚ and your kids are protected․ Nobody has to choose․

Most people don’t realize its potential․ They think that estate planning for a blended family means picking a side․ It doesn’t․

Trap #2: Forgetting that beneficiary designations override your will

This is always a surprise to people․

Your will does not control who gets your life insurance policy‚ your 401(k)‚ your IRA‚ your annuity, or any account that has a named beneficiary․ That’s because these assets pass to whoever you designate on your beneficiary designation form‚ regardless of what your will or trust says․

This can be a common issue with blended families where one spouse was remarried and never updated beneficiary designations: Perhaps your ex-spouse is listed as a beneficiary on life insurance‚ or your current spouse is and it says nothing about your children from your first marriage․ Neither outcome is what most people want․

I have seen estates where everything was carefully planned through a will or a trust but then a life insurance policy with an outdated beneficiary designation undid years of careful planning․

Beneficiary designations should be updated whenever an estate plan is reviewed‚ but it’s that much more important in blended families․ Read this article for more information on how trusts and other planning tools interact with your overall estate plan․

Trap #3: Having No Plan at All‚ and Letting Tennessee Decide

I get why people don’t do this․ Estate planning requires you to think about things most of us would rather not think about․ And when there’s a blended family involved‚ it can feel impossible‚ because any decision about money can feel like a statement about who you love more․

But if you don’t plan‚ you fall under Tennessee’s intestate succession laws‚ which dictate what happens to your assets when you die․ They’re not written with your family in mind․ They follow a formula․

If you leave behind a spouse and children from a previous relationship‚ under Tennessee law‚ your spouse and your children will own your property together‚ which may not be your desire and may create immediate financial hardship on the survivor who suddenly owns a house with stepchildren․ It also strains relationships․ Families that were getting along just fine can find themselves in conflict over assets‚ over property‚ over what you “really would have wanted․”

No plan is itself a plan․ It’s just not yours․

A Quick Example of How This Goes Wrong

Suppose a man in his sixties is married (for 12 years) to his second wife and has two children from his first marriage․ He has not made a will‚ and he owns a house and a small investment account․ By Tennessee’s intestacy laws‚ his wife and his two surviving children inherited a third of his estate each․ Although she expected to remain in their home‚ his wife is now legally a co-owner of a house with his stepchildren‚ with whom she had a strained relationship․ Nobody wanted this․ Nobody planned for this․ And now everybody‚ both financially and emotionally‚ have to pay to sort it out․

A properly drafted revocable living trust that takes blended families into account would have avoided the situation․

How Blended Family Estate Planning Really Works

When I work with blended families, we try to slow it down and to talk about real life questions:

 

• What do you want your spouse to be able to do with your assets while they are still alive?
• What do you want your children to receive, and when do you want them to get it?
• Are there any family assets (e․g․‚ family home‚ heirlooms‚ business interest) that you want to stay in the family?
• Have you reviewed all beneficiary designations you have on file?
• If your spouse remarries after your death‚ what happens to the assets you left behind?

These aren’t comfortable questions․ But they’re the right ones․ And working through them‚ with an attorney who understands how blended families actually work‚ is what separates a plan that protects everyone from one that creates conflict․

One more thing: how you communicate your plan to your family may be almost as important as the plan itself․ I have written before on how to structure your estate plan so your children don’t fight․ That is true for every family‚ but for blended families‚ especially․

The Bottom Line

If you have a blended family‚ you don’t need to make a choice between your spouse and your children․ A plan that considers the needs of your blended family‚ your assets‚ and your wishes can provide for everyone you love․

But that doesn’t just happen accidentally either․ It takes purposeful intent‚ the right legal plan‚ and someone to ask the questions that most of us don’t think to ask until it’s too late․

If you are part of a blended family‚ and you do not have an estate plan yet in place‚ or if you do have one‚ but have not updated it since you remarried‚ then you should talk with an attorney who focuses on estate planning․ This is exactly the kind of planning that I do every single day․

 

If you’re ready to take the next step, contact our offices and schedule a call with me by clicking the link below.