A “blended family” is more than just a staple of TV sitcoms. Today, it’s not unusual for a household to include children and even grandchildren from prior marriages, as well as adopted family members or same-sex couples. These various family arrangements can create estate planning complications that could lead to challenges in the courts after your death.

Fortunately, you can reduce the chances of family squabbles by using estate planning techniques designed to preserve wealth for your heirs in the manner you want, with a minimum of estate tax erosion, if any. Here are six prime-time examples.

1. Will. A will is the foundation of most estate plans. Your will generally determines who gets what, when, where and how. It may be combined with “inter vivos trusts” established during your lifetime or be used to create testamentary trusts, or both. While you can include a few tweaks for your blended family through a codicil to the will, if the intended changes are substantive — such as removing an ex-spouse and adding a new spouse — you should meet with your estate planning advisor to have a new will prepared.
2. Living trust. The problem with a will is that it has to pass through probate. In some states, this can be a costly and time-consuming process. Alternatively, you might transfer assets to a living trust and designate members of your blended family as beneficiaries. Unlike a will, these assets are exempt from probate. With a revocable living trust, the most common version, you retain the right to change beneficiaries and distribution amounts. Typically, a living trust is viewed as a supplement to — not a replacement for — a basic will.
3. Prenuptial agreement. Generally, a “prenup” executed before marriage defines which assets are characterized as the separate property of one spouse or community property of both spouses upon divorce or death. As such, prenuptial agreements are often used to preserve wealth for the children of a first marriage before an individual enters into a second union. It may also include other directives, such as estate tax elections, that would occur if the marriage dissolved. Be sure to investigate state law concerning the validity of your prenup.
4. Durable power of attorney. As the name implies, this document authorizes another person to legally act on your behalf in the event you’re incapacitated or otherwise unable to conduct your own affairs. Be aware that the power may be “broad” or “limited” (for example, restricted to selling or managing personal property such as a home). Because some discretion is involved, it’s important for an individual heading up a blended family to choose the attorney-in-fact wisely. This document may be coordinated with health care directives and/or a living will.
5. Marital trust. This type of a trust can be customized to meet the needs of blended families. It can provide income for the surviving spouse and preserve the principal for the deceased spouse’s designated beneficiaries, who may be the children of prior relationships. If certain tax elections are made, estate tax that is due at the first death can be postponed until the death of the surviving spouse.
6. Irrevocable life insurance trust (ILIT). Life insurance is often used to provide needed benefits should the main breadwinner suddenly pass away. However, if you retain any “incidents of ownership” in a life insurance policy, such as the right to change beneficiaries, the proceeds will be included in your taxable estate. This result can be avoided by transferring the policy to an ILIT. The trustee, who may be a professional or family member, will follow the directives spelled out by the ILIT.

These are just six estate planning strategies that could prove helpful for blended families. You might use others, or variations on these themes, for your personal situation. Consult with your estate planning advisor before year end to develop a comprehensive plan.

Sidebar: Update plan and policy beneficiaries

Don’t be cavalier when you fill out the paperwork for qualified retirement plans, traditional and Roth IRAs, and life insurance policies. Absent any proactive changes, your choices are effectively written into stone. Be aware that the designations for beneficiaries generally trump conflicting provisions of your will. Therefore, if you name an ex-spouse as the primary beneficiary, he or she may be entitled to benefits — even if a revised will names a new spouse as the beneficiary of your estate.

Remember to designate both primary and secondary beneficiaries. If the primary beneficiary dies before you do, the benefits will automatically go to the secondary beneficiary. This can avoid potential hassles later on.

Finally, if you’re part of a blended family, review your current beneficiary designations. Depending on your situation, you might reallocate the percentages going to children or grandchildren from a first marriage to accommodate offspring from a second marriage and even decide to include stepchildren and stepgrandchildren as beneficiaries.