I recently watched the series finale for the TV show “Modern Family”. The series followed the Pritchett family, which is a blended family with Jay Pritchett as the patriarch. Jay has three children, two adult children from a prior marriage, and one minor child with his current wife, Gloria. Gloria also has her own son from a prior marriage. In the series, the Pritchett family has minor squabbles amongst themselves but generally gets along. As the finale ended, I found myself wondering:
1. Would the family continue to get along in the event Jay passed?
2. Has Jay prepared an estate plan?
3. Will Jay’s plan result in animosity among family members?
Knowing that blended families are extremely common these days I decided now would be a good time to share my thoughts on estate planning with blended families. All of my clients with blended families seem to have very similar issues. Below are my three estate planning tips for blended families.
A. Have a meaningful conversation with your spouse and assess your family
Estate planning for blended families is not something you just approach without a discussion. It is always a good idea to have a discussion assessing your family and assets. The best approach is to sit down with your spouse and have a meaningful conversation about your family, assets, and both of your concerns. It is important to have a proper balance between providing for your spouse while preserving your assets. Each of you should assess your family, relationships amongst family members, and your assets. I have found that having this conversation helps you and your spouse hone in on your concerns and address any family issues prior to preparing an estate plan. You and your spouse should discuss the following prior to preparing your estate plan:
1. You should each discuss your family assessments. Does either of you have any family members with issues you find concerning, i.e., drugs, alcohol, or being a spendthrift? Are certain family members more reliable than others? Do any family members have any special skills or knowledge? Having this conversation with your spouse is a great way to determine each of your concerns and any family concerns that need to be addressed in your estate plan.
2. You should determine whom you would want to manage your affairs in the event you and your spouse are incapacitated.
3. Discuss what is important to each of you, i.e. providing for your spouse during their life, preserving an inheritance for your children, keeping family assets in your family line, etc.
4. What will happen upon the passing of the first spouse? Will distributions for your spouse be made outright or held in trust.
5. If assets will be held in trust, should a neutral third party be appointed as a trustee to quell any family animosity?
B. Simple planning is typically not enough.
It is quite common for married couples to have simple wills that leave all of their estates to their surviving spouse, or to their children in the event their spouse predeceases them. The surviving spouse is also typically appointed as a personal representative. This works perfectly for simple families, but as mentioned above, blended families have various issues to address those simple families do not. Applying this approach to blended families can result in significant consequences. Your surviving spouse can remove your children from their will and all assets would end up with one family line. Will your spouse and children continue to get along after your death?
Blended families typically benefit from using trust. Assets can be held in the trust to provide for your surviving spouse, during their life, with the remaining assets transferring to your children upon your death. The appointment of a neutral third party can help avoid future disputes between your spouse and your children.
C. Seriously contemplate your fiduciaries. (Attitudes may change upon death)
It is extremely important to assess whom you would appoint in various fiduciary roles. As previously mentioned, when using a trust, it may be a good idea to avoid appointing your spouse as the trustee. This is the number one complaint I see regularly. Whether it is from the surviving spouse or the children, all parties are typically unhappy.
Various disputes can arise between your surviving spouse and children. Your children may accuse your spouse of squandering your assets and question every trust expense. This can be quite stressful for all family members involved and typically severely diminishes or destroys any relationship your spouse may have had with your children.
Contact us today to discuss estate planning for your blended family.