For some, the estate planning process is straightforward. For those with complicated family dynamics, though, the process can be more involved. That’s not a bad thing. It just means that you need to be aware of what you need to do in order to ensure that your estate is passed down as you see fit.
But that can be complicated to figure out if you’re in a blended family. After all, you probably want to support your spouse, but you probably also want to make sure that your children from another relationship are taken care of when you’re gone. How do you do that?
Don’t forego estate planning altogether
The first important thing to recognize is that foregoing an estate plan altogether can jeopardize your vision of the future. In these circumstances, assets are passed down in a way dictated by state law.
This means that your spouse is going to end up with a significant share of your estate. While that may not be a bad thing, it also gives your spouse full control over what to do with those assets and how to pass them down when the time comes. In other words, your portion of the estate that goes to your spouse might end up being inherited down her family line, which can cut off your children from the financial assets that you intended for them to receive.
So, what should your estate plan look like?
There are several ways to protect your interests in your estate plan. Let’s take a look at some of your options:
- Remainder trust: One commonly utilized option is the remainder trust. Here, you leave assets to your spouse for the rest of their life. Then, once they pass away, the assets they inherited from you will pass to another named beneficiary. This allows you to take care of your spouse while still providing support to your children from another relationship.
- Gift assets during your life: The IRS allows you to give away several thousands of dollars a year to an individual without acquiring a tax penalty. Therefore, you might want to consider protecting your children by giving them some of your assets while you’re still alive. You might be able to avoid estate planning woes that way.
- Use life insurance: Another way to balance out your assets is to use a trust to support your spouse or your children while naming the other party as the beneficiary of your life insurance policy. This ensures that both receive support at the same time, too.
- Focus on specific assets: There might be specific assets that are important to your spouse or your children. If that’s the case, then you might want to focus your estate plan on distributing assets to those who are best suited to inherit them.
- Think about a marriage bypass trust: Here, you allow your spouse to use your assets without actually acquiring ownership of them. Then, once they pass away, those assets are inherited by a named beneficiary. This is similar to a remainder trust, then, except with a marriage bypass trust your spouse never actually owns the assets and therefore can’t give them away or otherwise dispose of them.
Make sure you’re protecting your interests
An ineffective estate plan can leave your hard-earned wealth in the wrong hands. If you want to avoid that from happening, then now is the time to start figuring out how to craft the appropriately thorough estate plan that you need. Fortunately, you can keep reading our blog and other sources to figure out the best course of action for you, your family, and your estate.