Blended Family? Here’s an Estate Planning Approach for You

Anyone who wants a lasting say in decisions about their health care, finances and legacy should consider an estate plan. Here are some specific estate planning considerations for those with second marriages and blended families.

Estate planning is important for everyone in our view, and when family structures get more complicated, it’s even more crucial to have a plan in place so there are no unintended consequences.

Take the illustration below, for example. Someone who has children and grandchildren connected to their former spouse, plus a child and stepchild with their current spouse, has many points of communication and financial responsibility to consider. 

family chart example

If your situation looks anything like this example, you will likely want to make sure that your estate plan properly connects all the dots.

Start by defining your estate panning goals

Before updating your estate plan, figure out what your wishes are. Who do you want to take care of? Should they get assets outright, or should they be limited in some way? Is there anyone you want to exclude? How much control do you want in terms of how an inheritance is accessed and used? Are there specific wishes you want followed?

In the example above, what would happen if you were to pass away? What would go to your current spouse? Should any of that money be held in trust for your children? And what about your stepchild? If your spouse were to pass away before you, how should their share of your estate be handled? 

These are the types of scenarios that you must imagine and decisions that you must make in order to draft an estate plan that reflects what matters to you

Implementing an estate plan in a blended family

Almost everybody should have the typical estate planning documents drafted or updated, regardless of family structure. These include a will, financial power of attorney, medical power of attorney or living will, and beneficiary designations on your insurance policies and financial accounts. When multiple marriages and blended families are involved, it often makes sense to also explore ways of using revocable and/or irrevocable trusts. 

One benefit of trusts is they typically avoid the probate process in court. This keeps the details of your estate private and can also save time and money. In addition, trusts can help protect your assets by keeping money safe from creditors, divorce judgements and heirs who may not be old enough or sophisticated enough to handle a lump sum inheritance. 

For example, if you were to pass away before your spouse but wanted to make sure the money stays in your bloodline, one idea is to leave your assets in trust for your widow’s benefit and have the trust pay income to her each year, then be transferred to a trust for your children's benefit when she passes away. Keeping the assets in trust can also protect the money if any of your heirs get divorced or involved in a lawsuit down the road.

There are many other uses for trusts. If you have a child with special needs, a trust can be arranged to provide for their care without putting the other benefits they may be receiving in jeopardy. You can even direct a trust to provide continuing care for a beloved family pet. In essence, a trust allows you to exercise your wishes even when you are not there to do it yourself.

You must name an executor for your will and a trustee for any trusts. Based on the scope and timeline of these responsibilities, you may wish to name a spouse, adult child or trusted friend, or you may prefer to name a professional third party, such as an attorney or corporate trustee. In any event, the more specific your wishes, the more precisely an attorney can draft your documents, and the easier it will be for your executors and trustees to execute your plan.

Estate tax for blended families

On top of all this potentially complex estate planning, it’s important to be mindful of estate tax. Using the right estate planning vehicles can potentially help you give less to Uncle Sam and leave more for the people and causes you love. Many estates don’t have to worry about paying federal estate tax, given the exemption amount is $12.92 million per person as of 2023, but that amount reverts to an inflation-adjusted $5.49 million per person exemption after 2025.

Time flies, and it’s easy for years to pass and major family transitions to take place without pausing to revisit your estate plan. We believe that it is wise to work with a professional wealth advisor and estate planning attorney to create your plan, protect your assets, ensure that your wishes are honored and establish a solid foundation for future generations. 

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Jerry Korey, CFP®

Jerry Korey, CFP®

Wealth Advisor

Jerry is a Wealth Advisor in our Morristown, NJ, office. He advises families and individuals on the many areas of financial planning, including cash flow management, tax planning, retirement planning, estate planning and investment management. Jerry joined legacy firm CI RegentAtlantic Private Wealth in 2014 and has over 10 years of experience servicing clients. Jerry graduated from Alfred State College with a degree in Financial Planning (BBA) in 2010 and earned his CFP® certification in 2014. Jerry lives with his wife, Thais, their son, Benicio, and their dog, Jack, in West Orange, NJ.


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