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What is Estate Planning for Blended Families?
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By doing proper estate planning, you can stay assured that your properties are in the hands of your legal heirs after your death. Having well-devised estate planning is crucial if you have a blended family. It will enable you to protect all your children's and family's interests.
Nevertheless, making estate planning for blended families may seem a difficult task. Here are some options and tips you can follow to create a concrete and well-thought-out plan regarding the distribution of your property.
What is a Blended Family?
Is Estate Planning Different for Blended Families?
The main idea or objective behind making estate planning for blended and regular families is the same. Through both these, individuals try to ensure financial protection for their families.
If there is any difference between these two, it would probably be the additional considerations that individuals need to keep in mind while making estate planning for blended families.
As there is a child from the other spouse in the family, individuals need to consult with their existing spouse before making decisions about the distribution of property through Wills and trust. By ensuring mutual understanding, you can reduce the chances of any conflict of interest in the future.
What Are the Different Estate Planning Options for Blended Families?
Here are the different options for estate planning for blended families:
- Marital Trust: Through a marital trust, you can ensure that your spouse will get the ownership right of your property after your demise. At the same time, you can also designate some residual properties for your children. They will get the right of ownership after your spouse's demise. This way, you can do estate planning for both your spouse and all the children in your family.
- Family Trust: You can build a family trust to include all your properties within a combined trust. In case of your death, the spouse will be responsible for distributing all your assets mentioned in the will, considering the need of the legal heirs.
- Outright Property Ownership: The structure for this outright property ownership trust is simple. In this trust, you will transfer all your assets to your surviving spouse outright without having any arrangement to transfer property ownership to your children. However, as you have a blended family, you must ensure that your surviving spouse will divide your properties without any bias.
- Immediate Bestowal: You can also make a will for an immediate legacy of your properties to your children. This type of trust allows you to directly transfer your properties to your children without involving your surviving spouse. However, before making such Will or trust, you must discuss it with your spouse and protect their financial interest.
What Are the Most Useful Tips for Estate Planning for Blended Families?
Here are some of the options that you can consider while doing estate planning for blended families:
Set Up a Trust: In a blended family, the spouse can become disinterested in the financial concern of the step-child. They may not want to share any property with that child.
As a part of the estate planning for a blended family, you must build trust on behalf of your child from the other partner. It will help you designate an entire property or a certain percentage of it in that child's name. Building trust lets you protect the financial interest of your family.
Open Retirement Accounts: Blended families have many members, so you need to make sufficient savings for the future. You can open your retirement accounts under employment-based, government-sponsored and/or insurance-based pension plans and build a corpus.
You also should ideally build at least two different retirement accounts while doing estate planning for your blended family. You can separately name your child from the other partner as the nominees in different accounts.
Purchase a Life Insurance Plan: Purchasing a term or life insurance plan is necessary to ensure your family remains financially well-off in case of your premature death. The beneficiary of your policy will get a substantial amount as a death benefit. It can help your family absorb the financial shock during the initial days after your demise.
Create Will:Individuals generally create Wills to leave properties in the name of their spouses and children after death. In the Will, you can mention your intention regarding the distribution of your properties. This way, you can clarify what percentage of your property different members of your blended family will inherit. This way, you can ensure that the spouse does not leave your child
Appoint an executor: Your Will should ideally have an executor to whom you give the right to administer all your testamentary records. You entrust them to execute your instruction regarding the property distribution. In case there is no executor in your Will, the court will determine the executor who will be responsible for carrying out the property distribution according to the Will.
When individuals die before making any estate planning for blended families, the court makes decisions regarding the distribution on behalf of their legal heirs. If your family also faces that kind of circumstance, the passing on of property ownership may not happen according to your wish.
If you want to ensure that your properties are distributed among all your children and spouse according to your intention, you should make estate planning as early as possible.
FAQs About Estate Planning for Blended Families
What are some most common errors in estate planning for blended families?
Who becomes the legal heir after marrying for the second time?
Is blended family a legal term?
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Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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