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How to Plan for Your Blended Family’s Future: Estate Planning Tips

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StrategyDriven Practices for Professionals Article | How to Plan for Your Blended Family's Future: Estate Planning Tips

The estate planning process can be complex. Many people enter into a second marriage with existing assets like IRAs, insurance policies, and workplace pensions that need to be changed.

If you have a blended family, these assets can create significant issues upon your death. Clear communication, working with an experienced attorney, and routinely reviewing your plan can help.

Communicate

Blended families often have complex relationships, and spouses must work together to set the tone for open communication. This means being respectful and focusing on goals. It also means communicating effectively, especially when it comes to finances. Couples should candidly discuss each other’s income, assets, debts, and spending habits. A clear understanding of each other’s goals can help couples avoid future conflicts over money.

In addition, couples need to discuss estate planning, including a review of their current and future financial status. For example, a trust could be created to provide a surviving spouse with an income for life and then pass on the remainder of the assets to children from a previous marriage after the surviving spouse’s death. This can help reduce estate taxes and ensure that both families receive a fair share of the overall estate.

It is essential to realize that blending families takes time and requires much commitment. However, the rewards can be immense, as the bonds that form within a happy blended family are often unbreakable and last a lifetime. While it is impossible to predict every problem that may arise, being prepared and having a sound support system can make creating a healthy family much more accessible.

Create a Family Budget

Blended families can face unique challenges when it comes to financial planning. For example, some family members may have inherited assets they are reluctant to give up, such as an IRA or other retirement accounts. Others may have been through a divorce before and are wary of giving up their rights to their ex-spouse’s estate share.

For this reason, it is essential to be open and transparent when discussing finances with your spouse. This can help prevent misunderstandings and disputes down the road. It also helps to set goals for your family’s future together, including how you want to distribute your assets and what legacy you wish to leave behind.

One of the best ways to avoid problems in the future is by creating a budget that you and your spouse can work on together, including all your expenses, from essentials such as housing payments, groceries, and utilities, to fun extras like shopping and vacations. Then, go through each month and compare your actual spending to your budget goals. Make adjustments as needed.

Another essential part of a family budget is being honest about each person’s debt and assets. This means sharing your bank statements, credit card balances, loan payments, and any alimony or child support you pay or receive. You discuss your savings, such as your retirement or brokerage accounts and any 529 college savings plans for children.

Talk to Your Lawyer

Estate planning in California is often seen as a private affair, but it doesn’t have to be. A good estate planning lawyer can help you develop a plan that meets the unique needs of your blended family.

You and your new spouse must discuss your goals and expectations about inheritance and the legacy you want to leave behind. This will prevent conflict and confusion when you pass on or are incapacitated.

For example, you should ensure that your children from previous relationships receive their fair share of the assets in your estate while at the same time preserving those assets for future generations. Your attorney can suggest strategies like trusts to accomplish this goal.

Another option is a pre-nuptial agreement, which can spell out how assets will be distributed in the event of death or divorce. This can help avoid conflict and unnecessary heartbreak in a family crisis. Finally, you and your lawyer need to update your plans regularly. This will ensure that they reflect your life’s current state and are consistent with your goals. Knowing your loved ones are protected will also give you peace of mind. Talk to a family law attorney today about creating a plan for your blended family.

Update Your Will

Many people entering a blended family have an estate plan from a previous relationship that they need to update. Others assume that if they leave everything to their new spouse, the children from their prior relationships will automatically receive a share of the estate fairly and equitably when they pass away. This is a big mistake.

A reputable estate planning attorney can help a couple develop a comprehensive plan that will ensure the wishes of their new family are respected and honored. This includes strategies to minimize estate taxes, protect assets from creditors, and facilitate the transfer of wealth between generations in a tax-efficient manner.

One of the most critical steps is documenting and identifying all assets, including property, bank accounts, retirement funds, life insurance policies, and any other investments or holdings you have. A complete list of these will ensure there is no confusion or misunderstanding when it comes time to distribute these assets to your family members during your death or incapacity.

In addition, it is a good idea to discuss with your spouse what bills you will pay and those the other party will pay. This will eliminate any misunderstandings and conflicts down the line. Finally, a pre-nuptial agreement is an excellent tool for blended families to establish the terms of how their assets will be distributed in the event of divorce or death.

Why You Should Start Estate Planning Today

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StrategyDriven Practices for Professionals Article | Why You Should Start Estate Planning TodayAt some point in your life, you’ve likely thought about what would happen to everything you own should you become incapacitated or experience death. These are not easy thoughts to have, but they are natural as death eventually impacts everyone. Planning ahead is important in order to make sure your assets are dispersed in the way you intended. You’ll want to make sure your legacy lives on through the people and charitable organizations that are important to you. An estate plan is an important plan to have at any stage in life. The more likely it is you have people in your life that may contest your wishes, the more important it is to work with an attorney to make sure your estate plan WORKS.

The Importance of an Estate Plan

A recent survey revealed only 4 in 10 Americans have an estate plan or will. As people get older, they are more likely to have a plan in place, but it still hovers around half. This is surprising given estate planning is important even when you’re young, especially if you have equity in cash accounts or real estate, or if you have young children. Accidents cannot be predicted and nobody knows how long their lives will be. If you were gone tomorrow, what would happen to your home, your bank accounts, and even your children?

Without an estate plan, upon your passing, your possessions would be dispersed based on the laws of your state. If you have young children but no spouse, or if you and your spouse should become deceased at the same time, the state would have to decide who cares for them. And if you were to become too ill to manage your money or make decisions regarding your care, a judge could be required to make the decision of who manages your bills and estate on your behalf. Not having an estate plan could leave your estate in chaos, vulnerable to claims by any blood relatives, some of whom you may not have been in contact with for years. Is that how you want to be remembered?

Not only is it costly to let the courts determine how your estate will be divided, it is time consuming and very public. It could take years for your rightful heirs to be identified and by then close relationships could be damaged forever. Creditors would also be able to access information related to the courts probate and could challenge it as well. As your estate remains in probate and creditors stake claim to pieces of it, the value of your estate dwindles.

An estate plan protects the people you love, who are the rightful heirs, and it allows your estate to pass on in private. Having a plan in place will also ensure your gift of inheritance is taxed as little as possible. The IRS will be more than happy to stake claim to part of your estate if no heirs have been identified by you personally.

The Pieces of Your Estate Plan

A solid estate plan is not an easy task to complete. It will require thoughtfulness on your part, and the assistance of an attorney to ensure it cannot be challenged later. Your estate plan should consist of the following important pieces:

  • A trust will hold property so that probate is avoided. That is, if it is set up correctly.
  • Your will will designate your heirs and how your estate is dispersed. If your estate is large, this could also include charitable beneficiaries.
  • A letter detailing your funerary wishes and disbursement of any smaller personal items of sentimental value.
  • A designated durable power of attorney should be someone you trust to take care of your estate and health decisions should you become incapacitated. This person should have knowledge of your health care wishes related to life and death decisions, which should also be included in a living will.
  • Keep a list of your assets and make sure your executor knows where to find it. This list should include any investment accounts, bank accounts, insurance policies and physical assets and real estate.

Who Should You Choose as a Durable Power of Attorney?

The person you choose to manage your estate does not have to be a relative. It can be a trusted friend. If you’re afraid of one person abusing your monetary accounts, a good idea is to designate a joint durable power of attorney. This way, two people you trust can ensure everything is managed honestly and as you would have wished.

Make sure that not only your attorney has a copy of your DPA, but also your financial institutions. Your bank may even have their own forms you’ll need to complete, so be sure to talk with your bank manager in advance regarding what they might require.

It’s important to know as much as possible about laws in your state as you plan your estate. For more estate planning information visit finitylaw.com’s resource hub.

The components of your estate planning are important pieces of your portfolio. You may change your plan through the years, as many people do and that’s fine, but it’s better to have a plan than no plan. Work through the process with your attorney and let your loved ones know when your estate planning has been completed. Having this knowledge beforehand will ease any panic should you pass and allow your heirs to focus on celebrating the life you lived rather than feeling overwhelmed with questions regarding what happens next.