Planning Techniques for Blended Families – How to Protect Everyone’s Interests

As estate planning attorneys, we often work with what has become known as “blended families”. Blended families often include married couples who have children from prior marriages or relationships. These families can present unique planning challenges when it comes to what should be left to the spouse, the children, and the stepchildren.

One challenge is that each spouse may have assets they have accumulated during their life prior to their current marriage. For example, they may have a lake house that was a favorite vacation spot for their children growing up. When they remarried later in life, however, they may now have stepchildren for whom that lake house holds no memories or connections.

Another challenge is that spouses in second marriages may or may not have strong relationships with their stepchildren. In some cases, they may have known the stepchildren since a young age and essentially raised them as their own. In other cases, the stepchildren may be adults with children of their own living across the country, and the stepparent may have little or no connection with them.

One thing to remember at the outset is that there is no legal requirement that you leave any of your estate to your children or stepchildren. The only person that can potentially elect against your Will and seek a legal share is your spouse. Generally speaking, your spouse has the right to inherit one-third of your estate. The “estate” on which this one-third is calculated includes not only assets in your name, but also so-called “testamentary substitutes”, such as assets held in trust.

This spousal elective share right prevents a spouse from totally disinheriting their spouse in their Will. In some cases, spouses in a second marriage do, however, give up this right if they sign a pre-nuptial agreement, which releases it. When it comes to children and stepchildren, you are free to give them whatever you want. If you make no provision for them in your Will, they will have no legal right to challenge it. With the exception that your children may have the ability to challenge it in limited circumstances where a challenge is generally available, i.e. in cases where you lacked capacity or were under undue influence. Such challenges are rare and often unsuccessful.

So – with all this said – how do you handle your estate planning if you have a blended family? One option is to treat the children and stepchildren the same. This is more often the case where the stepchildren have been with the stepparent from an early age. In those cases, the stepparent may think of those stepchildren as their own children.

This does not mean, however, that all children and stepchildren will be treated equally. As is unfortunately sometimes the case, the parent and stepparent may be estranged from one of the children and both the parent and stepparent may choose to leave that child nothing. That is their right, and as mentioned before, there is little the child/stepchild can do to challenge that.

If there is a desire to account for assets to the children and stepchildren separately, then there are several planning techniques to accomplish that. Below are two common examples to give you a sense of the options available:

First, you can make particular general bequests or specific bequests or devises (gifts of real property). A general bequest can be a gift of a particular amount of money, i.e. “I give $10,000 to my stepson Robert”. A specific bequest can be a gift of a particular asset, i.e. “I give my all my musical instruments to my stepdaughter Amy.” A specific devise can be a gift of a particular piece of real property, i.e. “I give my lake house at Caroga Lake to my sons, in equal shares.”
These types of gifts can be tailored to meet your particular needs, and as soon as they do not impact a surviving spouse’s elective share right, they can be set up however you desire. This customization of gifting may lead to uneven shares among children and stepchildren, but that is entirely permissible and may be appropriate for your circumstances.

Second, you can also consider the use of trusts. A common planning technique with second marriages is to leave some amount of assets in trust for a surviving spouse. That trust will often require that income is payable to the surviving spouse and that principal may be payable to them for their health, maintenance, and support, in the discretion of the trustee.

This allows the first spouse to ensure the second spouse is taken care of for the rest of their lifetime, but it also allows the first spouse to direct the distribution of the remaining trust assets after the second spouse later dies. In some cases, the remaining assets are distributed to the children of the first spouse. Such a trust can also direct that the second spouse have use of the marital home for a specific period or for the rest of their life, in order to prevent them from being displaced.

As you might imagine, each family is unique and what is appropriate for one family may be entirely wrong for another. To ensure you properly consider all options, it is advisable to consult an experienced estate planning attorney in your area.

For more information on elder law, estate planning, or estate administration, contact Matthew J. Dorsey, Esq.,Senior Partner with O’Connell and Aronowitz, 1 Court Street, Saratoga Springs, New York.