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3 Estate Planning Steps for Stepfamilies

Posted on: February 2nd, 2015
estate planning blended familiesThe number of Americans who remarry has doubled in the past three decades. According to recent reports from PewResearch, almost half of today’s marriages involve a partner who has been married before. Prior marriages and their dissolution often involve complicated issues regarding assets, including inheritances, debts, and consideration of how one’s children (both biological and stepchildren) should be treated in one’s estate plan. How should a stepfamily approach their estate plan?
  • Asset review and beneficiary designations. If asset titles are not updated to reflect a new spouse, complicated issues might develop. Typically asset distribution is addressed in divorce proceedings. Real property and vehicle titles might be updated as a result, but retirement accounts, bank accounts, and other assets could still reflect a former spouse as a beneficiary. In the event of the account owner’s death, one’s current spouse, stepchildren, or biological children might not receive the assets, which instead would pass on to the named beneficiaries.
  • Guardianship. The circumstances of every remarriage are unique. A spouse might have been divorced previously or their former spouse could have passed away. If a previous marriage involved children, how will they be provided for if current parents or guardians pass away? Will a new spouse legally adopt stepchildren? Do any of the children have special needs that require special needs planning? All of these issues can be addressed with an estate planning lawyer. 
  • Debt consolidation. The average American household manages almost $16,000 in credit card debt as of 2012. Merging two households in remarriage could result in debt burdens on the couple. If one spouse has debt, the couple should be careful when combining assets as this could jeopardize the assets of the debt-free spouse. Meeting with a tax attorney or Certified Financial Planner™ can help take advantage of tax breaks, help a couple pay down debt faster, and structure assets so that they are shielded from creditors and preserved for the benefit of loved ones. 
With the growing trend of remarriage, the importance of prenuptial agreements is also growing. If one spouse has a child from a previous marriage, the prenuptial agreement can direct who is responsible for financial responsibilities related to raising the child. Prenuptial agreements also protect the distribution and provide preservation of current and future assets in the event of divorce. 

Couples can address various types of property in prenuptial agreements, and as most states legally treat domestic animals as property in divorce proceedings, pets and their custody and care can be addressed in prenuptial agreements as well.

One of the most helpful things marrying couples can do to ensure that their estate plans reflect their wishes is to maintain regular reviews. An estate plan that addresses your goals today might be different than what you would like to fulfill three years from now. Changes to one’s health, lifestyle, inheritance, family growth, and death are all variables that could change how one wishes to manage one’s assets throughout one’s lifetime. 
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