Blended families bring unique challenges when it comes to estate planning. Parents have to navigate complexity of managing assets and ensuring the well-being of children. It can be overwhelming to with all the various options available. By understanding and putting into place some common estate planning strategies, blended families can ensure that their assets are protected and distributed according to their wishes. Not every strategy may be necessary for your particular circumstances. But having a good understanding of the options available can help make the estate planning process less daunting. Below are some estate planning strategies, to help you address the challenges blended families often face.
Create a Will
A will is the most important estate planning tool for blended (all) families. A will ensures the distribution of assets according to the wishes of the deceased parent. It can protect the interests of children from previous relationships. A will, allows an individual to specify how their assets are distributed upon death, rather than relying on Colorado’s intestacy laws. Additionally, a will allows the individual to name guardians for minor children and establish trusts for beneficiaries.
Create a Trust
If a will is the most important document in a blended family’s estate plan a trust document is the second. A trust provides a scheme for asset distribution according to the creator’s wishes, as well as flexibility in management. Also, a trust protects beneficiaries’ assets, and can manage and distribute them over time.
Appoint A Guardian
For blended families with minor children, a guardian designation is another important estate planning tool. It allows a parent to specify who will take care of their minor children in the event of their death. Sometimes, it’s not in the best interest of the child to live with the surviving parent. Or the other parent may have already passed. Signing an appointment of guardianship helps ensure the children are placed with someone who is trusted, loves the children, and will raise them according to their parent’s values and wishes. Moreover, an appointment of guardian can avoid potential legal disputes. Finally, court decisions may not align with the parent’s wishes or be in the best interest of the children.
Blended Families and Gifting
Gifting benefits blended families by transferring assets (i.e. cash and heirlooms) to specific individuals during the giver’s lifetime. Besides reducing the size of the estate, gifting assures the correct beneficiary receives the right inheritance. Moreover, gifting can be used to minimize taxes if the amount given is below the federal tax threshold.
Use A Personal Property Memorandum
A personal property memorandum leaves specific items, to the person named in the document. Your will must refer to this document, and it’s filed along with your will to the probate court. The memorandum can include collector items, family heirlooms, jewelry, pets, or just about anything. The personal representative is obligated to make sure the specified individuals receive the designated assets.
Taking Out A Life Insurance Policy
Life insurance can provide financial security for children from a previous relationship in a blended family. It also provides for a spouse or partner without significant assets. Life insurance helps transfer wealth between generations, and can cover outstanding debts and final expenses.
Forming a Limited Liability Company (LLC)
Creating an LLC as an estate planning strategy can provide asset protection, tax benefits, management flexibility, and control of assets for blended families. An LLC allows the owner of certain types of assets to protect them from creditors. It allows the owners to manage and distribute assets according to the parent’s wishes. It can minimize overall tax liability,and hold assets that generate income. Additionally, it provides a way to pass on assets to future generations.
Sign A Post-Nuptial Agreement
Post-nuptial agreements can be an effective way to plan for the distribution of assets of a blended family. A post-nuptial agreement safeguards non-marital assets from being passed to the surviving spouse. Instead providing for children from a previous marriage, to receive the assets.
To put it briefly, blended families bring unique challenges to estate planning. Understanding and utilizing common estate planning strategies can make the process less daunting. Keep in mind, every blended family is unique, and not every strategy may be necessary for every family. Having a good understanding of the options available however, helps protect your assets and makes sure they are distributed according to your wishes. Please consult with a qualified attorney or financial advisor to help navigate the complexities of estate planning for blended families.Follow me on social media: