You don’t want to wait too long to develop your estate plan. If you pass without an estate plan, your assets could be distributed according to state law, which could significantly deviate from what you want for your assets and your loved ones.
But for some, creating an estate plan can be trickier than they think. Amongst them are those who are in a blended family. If you’re in a blended family, then you might think that you can just leave assets to your spouse and everyone else will be taken care of, but this approach could create more trouble than you anticipate. Let’s take a closer look at this issue so that you know how to navigate it in your estate plan.
The risks of inadequate estate planning in a blended family
There’s a lot that can go wrong when you engage in estate planning within a blended family. For example, leaving assets to your spouse will support them for a long time to come, but without utilization of the proper estate planning tools, you’ll lose control over where those assets go after your spouse passes away. As a result, your assets could end up passing down your spouse’s family line, leaving your children from another relationship essentially cut out of an inheritance.
How can you ensure an estate plan meets your needs in a blended family?
Although thinking about estate planning can be stressful, you should take comfort knowing that the process is entirely customizable to suit your needs. Therefore, if you want to retain more control over your assets in your blended family, then you might want to consider utilizing some of the following:
- Remainder trust: With this trust, assets are distributed to an initial beneficiary during their lifetime, but once they pass away the remainder of the trust’s assets are released to a second beneficiary. In the blended family context, you can use this type of trust to support your spouse, then when they pass away you can have your assets automatically directed to your own children if you wish to do so.
- Lifetime gifting: You can give several thousands of dollars a year to each individual during your lifetime without having to worry about taxation. This is a great way to distribute your wealth as you see fit while giving you an opportunity to see how your loved ones choose to use their newfound wealth.
- Joint trust: This is similar to a remainder trust, but when your spouse passes away, assets in this type of trust will typically be split amongst your and your spouse’s children. The benefit of this type of trust is that it can address both individually owned property as well as marital property, whereas the remainder trust is going to be limited to property that you own individually.
There may be other options that are available to you, you just need to learn about them so that you can choose those that are right for you and your family. Just keep in mind that there are other considerations that should be taken into account when engaging in estate planning, such as taxation and creditor access.
Create the estate plan that brings your vision of the future into reality
There’s a lot that goes into creating an effective estate plan, and you don’t want to wait too long to build the plan that you need. That’s why now is the time to get to work educating yourself on the process and what you can do to protect your loved ones and your assets as you see fit.