AetnaPerspective - A Unique Estate
Planning Challenge
These days, Mike and Carol Brady might be considered more
representative of the average American parents than Ward and
June Cleaver. With about half of all marriages ending in divorce,
today's typical family may well include parents who've been
married before and children from those previous marriages.
Add to the mixture children from the new marriage, and
you've got a family unit with children who have three or more distinct sets of parents - and
quite possible widely divergent ages (and stages of financial
dependence and independence).
The emotional issues are, of course, enormous - as can be
the financial concerns.
Consider the example of a husband who writes a will leaving everything to his current wife - with the understanding that
she will provide for the children of his first marriage. There's
no guarantee that these children will receive anything. If the second wife
dies without a will, her descendants would receive her entire
estate - and her husband's children would receive nothing.
Or, she could ignore his wishes and write a will favoring her
own children. She could even remarry, and leave everything
to her new husband.
Especially in a blended family, a will is critically important in
deciding who gets what - and making sure your wishes are
carried out. In California, for example, the spouse of
someone who dies without a will is entitled to all assets
acquired during the marriage, and half of the assets brought
to the marriage by the deceased spouse. Remaining premarital assets would be divided between natural and
adopted children of the deceased - stepchildren would not
be considered heirs. In Florida, a new spouse is immediately
entitled to 30 percent of your estate.
Federal law complicates the issue even more. No matter
where you live, your spouse is considered the sole beneficiary of
your company pension plan - unless he or she waives those
rights in writing. Retirement plan assets are likely a considerable
portion of your overall estate, and you may wish
to pass some of those assets to your children.
Say you want 70 percent of your assets earmarked for your children, but the state mandates that your spouse receive 50 percent of your estate - you can use the prenuptial to address the problem. Use the prenuptial to
earmark which assets (and debts) are yours, and which belong to your future spouse. It's important to note that rights to retirement plan assets can only be waived after marriage - not in a prenuptial agreement.
A will, which provides wise financial planning and family protection for anyone, becomes even more critical in the case of the blended family. Be sure your will clearly establishes your goals - it's also a good idea to make sure that everyone concerned knows what your plans are. Remember that children who feel slighted may well challenge your will after your death. Conversely, if you want your
stepchildren - who may have no legal rights to your estate - to inherit, you can use your will to spell out those wishes.
Trusts provide another way to dictate the disposition of your assets
by allowing you to convey gifts and inheritances - to whomever you choose - now or in the future. They also allow you to attach strings to how the money is used and managed. For example you can establish a trust to make sure your
ex-spouse, who may have custodial rights - will not have access to your estate. Or, to make sure your children eventually inherit your home, but that your current spouse will be able to live in it for his or her lifetime.
You'll need help in developing a prenuptial agreement, establishing a trust - and even in writing a will, especially if your family situation is complicated. Friends and colleagues with similar family
circumstances may be able to provide references, of you can write to the American College of Trust and Estate Counsel (3415 S. Sepulveda Blvd., Ste. 460, Los Angeles, CA 90034) for a list of experienced trust and estate attorneys in your state. A financial planner can also help you explore your options, and how to use financial vehicles - life insurance, annuities, IRAs, mutual funds - to both build your estate and (in many cases) protect it from taxes.
While Estate Planning isn't an easy subject in the best of circumstances, and can become downright difficult in the case of the
blended family - it's too important to ignore. Protecting your family - however you define it - the way you think is most appropriate should be one of your first financial priorities.
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