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.
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.