Estate planning is an essential aspect of planning for your family’s financial future, and it’s particularly important and delicate for blended families. The dynamics of bringing separate individuals together as a blended family create unique considerations when planning for the next generation. Here’s a guide to how you can ensure your family’s financial future is well protected.
Understanding Estate Planning for Blended Families
Estate planning for blended families requires one to take into account the unique dynamics that past relationships, biological relationships, and current relationships create. Bringing two distinct sets of parents and children together is not easy — nor is planning for all members’ financial futures.
Some common issues that blended families frequently face are issues such as:
- How to meet the needs of all family members
- How to manage unequal assets and incomes
- What a fair distribution of assets looks like
- Whether children’s inheritance should wait for the death of a step parent
- What inheritances from separated spouses might provide
- Other issues, such as those already faced in other areas of life
These are not small matters, and they’re bound to bring forth some disagreements that must be worked through. The goal is to work through those with clear and honest communication, as this is how you can keep disagreements from becoming outright conflicts.
Of course, working with an experienced lawyer, accountant and financial planner can be a great help when working through these matters.
Estate Planning Strategies for Blended Families
There are multiple estate planning strategies that families can use to execute their desires. Estate planning for blended families is no different:
- Will: One of the most crucial aspects of anyone’s estate planning is creating a well-drafted will. A will serves as a legal document outlining how your assets will be distributed upon your death, ensuring your wishes are carried out and potential disputes among family members are minimized.
- Trust: Trusts offer a controlled and flexible way to distribute assets to beneficiaries. This tool allows you to specify when and how your beneficiaries receive their inheritance, providing an added layer of control over asset distribution. It also might have implications in how your savings are spent (or not spent) during senior years. Trusts can be especially useful for blended families that might want to navigate having children in different life stages.
- Beneficiaries: Beneficiaries are the ones who receive benefits from insurance (e.g. life insurance) and retirement accounts, and the funds can usually be distributed without going through probate when a person is a named beneficiary. Make sure to update any named beneficiaries of accounts after establishing a new blended family. This typically requires filing a simple form.
- Documents: It’s important to plan for incapacitation due to health. Make sure you know who will make decisions, and how they’ll best follow your wishes. Taking care of this requires a living will (for financial matters) and a medical power of lawyer (for healthcare/end-of-life decisions). These may have to be redone after establishing a blended family, if your choice of who takes on each role changes.
All of these should be prepared in concert with an lawyer so that forms are legal, properly established, and thorough.
Special Considerations for Blended Families
Every blended family is unique and has its own nuances to navigate. There are certain special considerations to most blended families, though. When estate planning for blended families, all parties should be aware of the difficulties that are inherent in:
- Navigating relationships between biological children and stepchildren
- Ensuring the surviving spouse is financially taken care of
- Managing existing conflicts between various family members
- Handling tax implications that can be extensive and substantial
Again, the key to doing this successfully is open communication and working with knowledgeable professionals. Those who are familiar with the nuances of estate planning for blended families are a great resource and guide for this process.
Get Help with Estate Planning for Blended Families
No matter what your family structure is, don’t neglect to properly go through the estate planning process. If you’re estate planning for a blended family, don’t let the additional challenges stop you from tackling this.
If you have a blended family in the British Columbia area, seek professional help for the best potential process and outcome. We at Avisar Chartered Professional Accountants are here to help. We’ve worked with many blended families, are a leading firm that offers estate planning in BC, and are ready to help you.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.