You’ve been blessed to find a love for a second time. Congratulations! A new (re)marriage can bring the joy of finding a loving partner twice in a lifetime and the promise of happy times to come.
So, it’s no wonder that amongst newly remarried couples sticky topics such as finances and blending of family dynamics can easily get pushed to the side. After all, who wants to be distracted from the bliss of their new marriage to talk about who inherits what and how much?
But, addressing estate planning decisions is not something that should be put off – especially if you have just gotten remarried. When it comes to finances and inheritance, the best policy always combines honesty, clarity, and a proactive approach.
To help newly merged couples put their best foot forward, we have compiled a list that breaks down some of the key tasks and considerations that apply to estate planning for blended families.
Quick Things to Update
Sometimes, it’s best to start with tasks that are fairly quick and easy. It’s a great way to get the ball rolling without too much stress. And it always feels good to be able to check some things off the list.
With that in mind, here are some items that may need updating:
- Beneficiaries on your 401(k) and IRA plans
- Beneficiaries on your life insurance plans
- Legal directives, such as medical power of attorney
- Your Will
Failing to update Wills or beneficiary designations is one of the most common mistakes remarried people make.
In all the hustle and bustle of starting a new life, it’s easy for such details to slip through the cracks. But imagine the awkwardness and legal battles that could result if tragedy struck and an ex-spouse was still listed as the beneficiary on an insurance policy or retirement account. Or what if an ex-spouse was still the person designated to make medical and/or financial decisions in the case of death or incapacitation?
Tactical Questions to Ask
At the next level, there are a number of questions you need to ask about how a second marriage might affect various kinds of liabilities and benefits. There are many scenarios to consider here, and it’s not unusual for one question to lead to another once you start sorting through everything.
Here are a few examples of the types of questions that fall into this category:
- Do you or your spouse have any financial obligations to ex-spouses?
- Do either of you have other liabilities that might negatively impact each other’s financial standing?
- Is either of you collecting benefits such as Social Security from a deceased spouse, and — if so — do you know how remarriage will affect those benefits?
- If either you or your spouse-to-be is on Medicare or Medicaid, do you know if getting married will put the other party’s assets at risk?
Big-picture Decisions to Make
Beyond simple updates and tactical questions, you get into the territory of big-picture questions that deal not only with the strategic side of estate planning, but also the emotional and inter-relational side of things. While coming to agreement on these items might take a little more effort (and involve a little more discomfort), it’s well worth it to get out in front of these decisions before they become an issue.
Each relationship and blended family will have its own particular set of challenges and considerations, but here are a few examples of the more involved types of decisions that may need to be made:
- Have you discussed whether you will keep your assets separate, commingle them, or create a hybrid solution that involves keeping some assets separated and commingling others?
- If either of you have children from a previous marriage, do you know how you want to handle leaving assets to them and any other heirs?
- If there are young children in your family, do you know how you plan to handle any guardianship issues and provide financially for those children?
Alternative Options to Consider
Just like every marriage and every family is unique, so too are the estate planning solutions that best serve those couples and families. Instead of making assumptions about what you must or should do, take time to explore and consider all your options. You never know what you might be overlooking.
For example, while many people might assume that all heirs should be treated equally (especially in blended families that include children from previous marriages), that’s not necessarily the best approach to managing an inheritance.
Consider the following scenarios:
- Is there a child with a disability in the family who might require additional support? In such a case, it may make sense to set up a special needs trust in addition to or in place of any equally divided inheritance.
- Or maybe you’re dealing with one child who is less financially responsible. This might necessitate a tailored solution that’s different from what’s appropriate for other children in the family.
- There are also instances when it makes sense to gift a portion of a child’s inheritance while you’re still alive. You and your spouse can each make fairly generous annual gifts (up to $15,000 per person or $30,000 per couple) without incurring the federal gift tax or having to involve the IRS. And even though Connecticut does have its own gift tax, sometimes it still works to your advantage to gift a portion of an inheritance ahead of time.
The point is, there are a lot of different scenarios and options that you may not even be thinking about, which could ultimately work very well for your new family. You owe it to yourself (and your new partner and kids) to explore those options thoroughly.
Final Advice: Don’t Go It Alone
At the end of the day, your goal is to cover all the potential scenarios, have all your proverbial ducks in a row, and make the best decisions possible for you, your spouse, and your children.
The most efficient way to accomplish this is to work with a knowledgeable attorney who has the experience and expertise to deftly guide you and your family through all the potential solutions.
Working with a trusted Connecticut estate planning attorney will not only help ensure that you aren’t missing out on any opportunities, it will also make it easier to facilitate clear and open conversations.
Our team would love to help you develop an estate plan that’s perfectly tailored to meet the specific needs of your blended family. Give us a call, and we can get the conversation started so you can start your new life together from a strong foundation of trust and smart planning.
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