In a blended family, it can be difficult to determine what’s yours, mine, and ours, but it’s an issue that needs to be addressed.
The first step is for you and your spouse to have a very open conversation to discover:
- Plans you may have from previous marriages — You will need to review any plans you have in place from previous marriages, including wills, trusts, beneficiary designations, guardianships, etc.
- Goals and wishes — Each of you needs to clearly define your goals for upholding previous obligations, how guardianship will be handled for both biological and step-children, and how you want your separate or combined assets distributed. This is extremely important, because ownership of assets determines how they will be distributed in the future.
- Together or separate — Commingling or keeping assets separate can depend on several factors that a couple needs to decide. If one party brought in significant assets, you may decide to keep those separate, while commingling assets you build together. Children also play a major role in this decision. You may already have college accounts or trusts established for your children from a previous marriage and want those assets to remain separate. Many parents feel strongly about setting aside assets specifically for their children from a previous marriage. Again, forthright communication is key.
- Review the marital property laws in your state — Make sure you understand how your state laws govern the way you hold assets. For example, if you live in a community property state, any assets that aren’t identified as separate will be considered equally owned as community property of the couple, even if you intended to keep those assets separate because they were acquired prior to the marriage.
While you may feel it’s overkill, you need to document every detail of your estate plan to avoid potential issues down the line, especially if you have children and former spouses. Also, this legal documentation will help avoid the expensive and potentially emotional issues involved with probate court.
- Wills — You should create a will that provides clear instructions on how all of your assets are to be distributed, guardianship for minor biological and stepchildren, healthcare directives, and any other wishes to be carried out should either of you become incapacitated or die.
- Trusts — Blended families should consider developing a trust, which holds assets on behalf of the beneficiaries and defines how and when assets pass to the beneficiaries. A trust can also last for years, through the lifetimes of a surviving spouse, children, and even future generations. For blended families, certain types of properly established trusts can provide financial support for your spouse and still ensure something is left for your children.
- Account titles — Even if you have a will or trust, you will also want to make sure that accounts such as a retirement account have defined beneficiaries. Additionally, other accounts can be owned as joint tenants with right of survivorship or transfer on death, making the owner’s intentions clear that in both cases, the assets go directly to the party named on the account. Please call if you’d like to discuss this in more detail.