Blended families, those resulting from multiple marriages, and also including grandparents raising grandchildren, sometimes while their own children are still in the home, are much more common than a generation ago. Some blended families resemble the Brady Bunch while others are more akin to the Hatfields and McCoys. All blended families present special estate planning challenges.
In the case of families with meager assets, many agree that the spouses should provide for each other first, understanding that all resources may be required for the survivor, with the expectation that the survivor will be fair with all of the children. For small estates, this may be the preferred option, even though not without pitfalls–the survivor may choose to disinherit the children of the deceased spouse.
The very wealthy have the option of splitting their estates to provide for both their spouses and children, from prior or current marriages, secure in the knowledge that the needs of all will be met. Planning must still occur, but abundance simplifies the task.
For the vast majority of us, some serious soul searching and planning must occur in order best to protect the competing interests of spouses, children, step-children, and, perhaps, grandchildren, and to achieve a result which will be perceived to be fair. In making planning decisions, parents should be mindful that the biological parent is the glue which binds a blended family and the step-children and step-parent many times become estranged when the parent spouse dies. There is also a natural tendency for spouses to name each other as decision-makers, and then name their own children as alternate decision-makers, sometimes with disastrous results. Every parent is convinced that his children will “do the right thing,” and not prefer their families of origin over their blended families, but, if that confidence is misplaced, court battles which could have been avoided are likely to result. Planning to minimize potential conflicts is paramount in planning for blended families. Frequently, an independent or corporate trustee is the best choice for successor trustee in order to minimize conflicts.
Most spouses hold their property jointly (the survivor becomes the sole owner of all property on the first death) secure in the knowledge that the survivor will be “fair” with all of the children. This arrangement, while simple, may not be the best choice for blended families with more than meager assets. This arrangement does not allow for subsequent marriages, and more step-children, for catastrophic illness, or for surviving spouses who just do not like their step-children and choose to give preference to their own children even when there are adequate assets to provide for both the spouse and children with a bit of planning.
Life insurance can be a good option to provide for the children of the deceased spouse. Adult children may be made the beneficiaries of life insurance, thus insuring that they receive an inheritance from the parent. If the children are young, or if there is a possibility that funds will be needed for the surviving spouse, the insurance can be paid to a trust for the children or to a trust for the benefit of the spouse and/or the children with the remainder to the children of the deceased spouse. Such arrangements are best administered by a neutral party serving as trustee to avoid conflicts between the surviving spouse and the step-children.
Planning techniques may involve splitting the assets between the spouses and utilizing a series of trusts, including a marital or QTIP, trust to provide maximum support for the surviving spouse while guaranteeing that the remaining assets will be distributed in accordance with the desires of the deceased spouse, typically to children from prior marriages. Many times, these plans also make specific provisions for the remarriage of the surviving spouse. An experienced estate planning team consisting of an attorney, accountant, investment advisor, and, frequently a corporate trustee, working together will insure that the family’s objectives are met.
Every adult should have a durable power of attorney for health care and health care directive in place, but this is especially important for blended families to minimize conflicts regarding medical treatment and decision making authority in the midst of the stress caused by illness.
In my practice, when the children of the blended family are adults, I encourage my clients to have a family meeting and to explain to the children what arrangements have been made, both financial and otherwise, and why. The conversation need not include a discussion of asset values, which is abhorrent to many, but should include information as to whom will be in charge of administering the estate, why that person or trust company was chosen, and a request that the family cooperate with respect to the estate. It should be explained that the chosen trustee is being charged with the responsibility of carrying out the wishes of the parents, that they have given much thought to their planning and have exercised their best, but not necessarily perfect judgment, in reaching an agreement for the benefit of the entire family. Children who have heard from their own parent, rather than their step-parent following their parent’s death, what arrangements have been made are more likely to be accepting of the choices which have been made even if they do not agree with them. Good planning cannot make the Hatfields and McCoys a Brady Bunch, but it can definitely make the inevitable less conflict ridden.