Blended families and estate planning

by | Sep 7, 2017 | Estate Planning |

There are many pitfalls for the inexperienced estate planner. Do-it-yourself planning can go from confusing to hopeless with a just few, relatively common wrinkles. One of the most common factors that can make estate planning complicated is the blended family.

Assumptions and benefits

Part of the problem is that the law makes certain presumptions about how a person would want to distribute his or her assets. In some cases, the law is purposefully designed to make it hard to accomplish a particular goal. A married person with children from a prior relationship may find it challenging to craft just the right plan.

Spouse as beneficiary

When it comes to insurance policies, retirement plans and IRAs, there is a strong expectation that the beneficiary will be a spouse. If a person gets divorced, it is important to consider whether the now former spouse should be in line to receive those benefits. In most such cases, the policy or account holder needs to take affirmative steps to change the designation.

If a person gets remarried, the new spouse is often the named beneficiary. This can lead to concerns about taking care of the children from the prior relationship. There are several ways to accomplish this while still leaving the new spouse as the named beneficiary.

Goal-oriented estate planning

When sitting down to create a plan, you must have a clear understanding of what you are trying to accomplish. There are many tools available to get you from where you are to where you want to be. The trick is to make sure that you don’t let the tools dictate your plan to you.

Once your needs and objectives are established, you may need to work with an experienced professional to craft the optimal plan. Mistakes can threaten your legacy, but they can also threaten your financial freedom and security just when you need them the most. Plan carefully.