Your financial journey can be just as thrilling as any other adventure you embark upon. Admittedly, there are challenges along the way. It can be difficult to confront poor financial habits or to make hard sacrifices as you strive to reach your goals.
Yet, it’s precisely these obstacles that make the attainment of our financial goals even more rewarding. Getting out of debt, buying a dream home, starting a business, or building your retirement nest egg are all exciting moments when it’s okay, and even encouraged, to pause and celebrate your achievements.
You might be tempted to think your financial journey has reached its destination once you have checked off a financial goal. There’s nothing left to do, right? Wrong.
The next part of the journey is often met with reluctance: estate planning.
This involves protecting the assets you’ve worked so hard to accumulate over the years and making decisions about their distribution after your passing. And while we can all probably agree on the importance of estate planning, it’s far from an effortless endeavor and is a commonly delayed or avoided part of the journey.
Some might fear facing the inevitable reality of what lies ahead, while others dread the hard “who gets what” conversations. This can be particularly true when adding an extra layer of intricacy—blended family dynamics.
Navigating Estate Planning for Blended Families: 3 Key Considerations
When navigating a blended family situation, the involvement of more individuals (including legal and non-legal relatives) calls for careful attention to how things are structured and adds a sense of urgency. If you’re in this situation without an estate plan, place this at the top of your “To-Do list” as you start thinking about these key considerations:
- Inheritance for biological/legal children and stepchildren.
- Inclusion of former partners/spouses.
- Seeking professional and specialized guidance
Let’s take a closer look into why each aspect is critically important within the context of a blended family.
Inheritance for Biological/Legal Children and Stepchildren
One of the distinctive challenges in blended families revolves around deciding if and how to divide an inheritance between biological/legal children and stepchildren. There is no definitive right or wrong approach, as it ultimately comes down to personal preferences. To help you start thinking through this, consider the following questions and scenarios:
What Is Your Relationship with Your Stepchildren?
Some individuals may have been actively present in their stepchildren’s lives from a young age, perceive them as their own children, and have a strong desire to continue providing for them. Others may have formed a connection with their stepchildren later in life, or even adulthood, and may not feel a desire or obligation to leave them an inheritance.
Will Your Stepchildren Receive an Inheritance from Your Partner/Spouse or Be Financially Secure without Your Support?
In some situations, when a couple enters a new relationship with children from previous relationships, they may mutually agree to independently provide financial support for their respective children without expecting the other partner to do so, both currently and in the future.
The assurance that each child will be provided for can bring a sense of peace. It may be reason enough to exclude stepchildren, particularly if there are limited assets involved and the primary goal is to protect the inheritance of one’s biological/legal children.
Every family is unique. These scenarios may not apply to you, but hopefully it gets you thinking about your family situation.
Tip: Your stepchildren don’t have legal rights to your assets unless they’ve been legally adopted. Consequently, if you pass away without an estate plan, they won’t be entitled to an inheritance like a biological or legally recognized child might be. If you intend to leave an inheritance for non-legally adopted stepchildren, you need a plan explicitly stating their inheritance rights.
Inclusion of Former Partners/Spouses
It’s not uncommon for individuals to want to leave an inheritance and provide ongoing financial support for a former partner or spouse. Especially when children are involved, or if they have maintained a positive relationship with their former partner or spouse. If this is you, here are some questions worth contemplating:
Are There Minor Children Involved for Whom You Are the Primary Financial Provider?
Consider the potential impact on the lives of any minor children and their long-term financial stability. If you’ve been the primary financial provider, you might want to leave an inheritance to a former partner or spouse to ensure ongoing support for the children.
Alternatively, suppose you leave the inheritance directly to the children to care for their specific needs. In that case, you may consider appointing your former partner or spouse to manage those assets on their behalf until the children reach the age of majority.
Are There Any Divorce Settlements or Prenuptial Agreements That Require You to Provide for a Former Partner or Spouse in the Event of Your Passing?
You may have legal documents containing provisions that require you to designate your former partner or spouse as a beneficiary to some of your assets, which leaves you with no choice but to include them in your estate plan.
Tip: If there are no legal obligations and you have no desire to maintain financial ties with a former partner or spouse, promptly remove them as a beneficiary from your accounts. It’s all too common to forget or delay updating your beneficiaries after entering a new relationship. Ultimately, this can lead to your assets falling into the hands of someone you no longer wish to leave an inheritance.
Seeking Professional and Specialized Guidance
You may have some flexibility and options in the previous two considerations, but this one not so much. Given the unique dynamics and legal complexities of estate planning for blended families, it should go without saying that this is not the time to attempt a DIY estate plan.
Consulting with an experienced estate planning attorney who specializes in working with blended families can help you navigate challenges, avoid blended family inheritance issues, and develop a plan tailored to your specific needs and goals.
Tip: Reach out to your employer to inquire about any available legal benefits. They may be able to connect you with an estate planning attorney in your state who can cater to your specific needs.
Reaching Your Estate Planning Goals with Financial Planning
You probably have big financial goals that will directly impact those you love, from providing for your family’s basic needs to creating a lasting legacy of generational wealth and everything in between.
While an estate planning attorney can assist in creating a plan for the future distribution of your assets, your present focus may be on building and managing those assets to ensure future provision for others.
That’s where our expertise comes into play—we can provide you with a financial roadmap that empowers you to confidently work towards your financial goals (with us guiding and rooting you on along the way!). We want to help you enjoy the fruits of your achievements in the present and ensure that future generations can reap the benefits too, if that is your goal.
If you’re ready to start or continue on your financial journey with a team who is on your side, give us a call at 877.333.1015 to schedule a meeting. We can’t wait to connect with you!