What are the essential elements of estate planning for a blended family here in San Diego or across California? According to the U.S. Census Bureau, almost 1 in 5 households in the United States involves a subsequent marriage for one or both of the parties, and children from a previous marriage or relationship. What are the most essential elements of an effective estate plan in these situations?
Key Takeaways of Estate Planning for a Blended Family:
- It is vital to have an open conversation between the spouses regarding provision for each spouse, as well as the unique needs of each child.
- Children from a prior marriage require additional consideration and protection to ensure adequate provision is legally established, and to avoid disinheritance after one's passing.
- The primary focus of a blended family estate plan involves a balance between the needs of each spouse and each child from a previous relationship.
There are many things to consider when approaching a new marriage and blending children, assets, and business ventures into a new family in the future. As in any healthy relationship, each party needs to be able to participate in an open, candid conversation regarding provision for one another and each child in the event something happens down the road.
Unfortunately, we have all heard of stories where a spouse has passed in a subsequent relationship, and the surviving spouse elects to ignore the needs of step-children to provide for themselves and their own child(ren). Unfortunately, it is also quite common for banks to "freeze" an account, restrict access, or even close an account upon the passing of one of the account holders if proper protections of survivorship are not in place. While this is intended to prevent unauthorized withdrawals and misuse of community assets, it can be very disruptive for the surviving spouse.
Estate planning for a blended family establishes a legal structure to ensure the needs of each spouse and their individual and shared children are provided for in the event of an unexpected illness or loss of life. It ensures jointly held assets and accounts are appropriately structured and titled to smoothly pass to the surviving spouse without question or delay, while avoiding probate altogether.
While many states provide options to ensure "survivorship rights," the manner in which jointly held property or bank accounts are actually handled upon the death of one of the owners is not as simple as "the surviving spouse simply takes over." It is crucial to ensure proper steps are taken to legally establish the will of the parties and protect their interests. Typically, if the spouses own a home together, and one of them passes, the intention is for the surviving owner to retain ownership. For example, California has established "joint tenancy" and "community property with right of survivorship." Both of these strategies ensure the surviving party (spouse) becomes the sole owner of the real property or financial account without the need to go through the process of probate.
Here in California, there is specific legal language that must be included on the property deed or financial account to protect survivorship rights. This language usually states the property is "community property with right of survivorship," or "held as joint tenants with right of survivorship."
Estate planning for a blended family also provides the assurance that the needs of each child will be considered and protected. Look for an integrated estate planning and tax attorney, who can guide you through critical conversations that lay a strong foundation for the new blended family. You will need professional help and guidance to develop an estate plan, business succession plan, and tax strategy that reflects your new reality, while protecting and preserving the integrity of all you have experienced and built to this point in life.
Each spouse may bring children from a previous marriage to the new family. You may consider having children of your own. How do you provide for children of a prior marriage and ensure their financial well-being if something were to happen to you? How will the needs of any shared children be addressed?
In these cases, it is important to develop an estate plan with the appropriate documents and legal vehicles to set aside property, resources, assets, or insurance coverage that is designated for the surviving spouse, as well as the welfare of each child or beneficiary. Effective estate planning and trust documents establish your intentions, allowing you to move forward confidently into your new family while preserving and protecting the interests of your existing children and potentially those of your new spouse.
Are there assets that need to be maintained as "separate" from the community property of the newly blended family? How do you intend for your share of community assets to be divided if something unexpected happens in the future? How can you structure your affairs to accomplish these goals, minimize tax exposure, and build wealth? Take the time to have conversations with your spouse, and proven, experienced legal, tax, and estate planning professionals for blended families in San Diego and throughout California, so that you may build a new life with your partner while protecting your heirs and beneficiaries and protecting all that you have worked to build to this point.
