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The Wealth Counselor
How to Overcome the Challenges of Legacy Planning for Blended Families
As you’ve probably already noticed, estate planning can be challenging - not only for the “traditional” nuclear family but, also for the millions of “non-traditional” families.  Although the increased complexity and variety of family structures makes effective planning more challenging, the need is greater now than ever before. Of course, no single newsletter could ever cover all the potential issues, so always feel free to contact us whenever we can offer assistance to you or your clients.
 
A Few Common Estate Planning Challenges That Blended Families Face
  • One spouse wants to leave all assets to their children and wants the other spouse to do the same. A lopsided situation can occur. Don't be afraid to address this potential problem with your clients. Relying on joint accounts and “plain” beneficiary designations can yield undesired results in these situations.
  • One spouse wants to leave the entire estate (or a substantial part of it) to the surviving spouse but also wants to be “fair” to his her or children. If you notice outright gifts in existing trust documents or wills, joint accounts, or no estate plan at all, there is a potential problem on the horizon. In a blended family situation, any plan that leaves full decision-making authority for the full estate to the surviving spouse can result in a difficult situation for the children of the first-to-die spouse. Luckily, there are trusts that provide benefits to the surviving spouse while still protecting the deceased spouse’s children.
  • Infighting among children and step-children, while the spouses are still living, is a definite warning sign that comprehensive planning is necessary. Sadly, sibling rivalry often gets heightened when parents pass on and when emotions in the family run high. Step-sibling rivalry can be worse and lead to complicated, troubling fights if left unchecked. Your clients need a plan to help prevent intra-family disputes in the future, especially if the children and step-children are already having some issues.
  • Spouses may disagree about how to divide assets fairly. Being a referee isn’t easy, but you can add value for your client by developing solutions and recommending resources that achieve both spouses’ goals.
  • Designations of beneficiaries and trustees might leave the impression that parents are playing favorites. Set the family up for success and harmony. Work with your blended family clients to uncover potential rivalries within the family and develop a strategy to ensure equitability as well as the perception of equitability.
Communication and proper planning can overcome these challenges. As an advisor to the family, you are well-positioned to help your client solve these complex planning issues equitably and ethically.

What Planning Options are Available for Blended Families?

The new couple should be ready to discuss their existing finances, their financial goals, and how they expect their assets to be distributed should one of them become incapacitated or die. Your role is to point out pitfalls and set the stage for an equitable, calm process that minimizes losses due to creditors, predators, and possible family infighting. Some potential scenarios include:
  • Two individual estate plans. Under this scenario, the couple should plan to keep all of their individual assets separate. If you are advising newlyweds or couples who have yet to marry, be sure you point out this solution.
  • A single joint estate plan. The couple can keep certain assets separate. Bear in mind that a significant amount of work and thinking may need to be done to ensure that the plan works as intended in a variety of situations.
  • A combination of the two. The couple creates a legal framework to designate some assets as separate and some as joint assets.
Of course, solutions for these scenarios must be within the framework of our community property laws in Washington.

We are here to help you with legal side of estate planning for blended families. When you have a question or need solutions for your clients, please give us a call.
Sound Estate Planning, PLLC • 152 3rd Ave. South, Ste. 107 • Edmonds, WA 98020 • (425) 967-7287