Estate Planning and Blended Families
While a blended family may seem to have some unique circumstances, common threads link estate planning and blended families. One example is the conflict of expectations. In this scenario, updating individual documents, including a will and beneficiary designations for RRSPs, workplace pensions, and insurance, is imperative. Hiring a mental health professional to help with estate planning in a blended family is also essential.
Conflict of expectations in blended families
What blended families should know about estate planning? Estate planning in blended families can be a tricky process. Often, heads of households don’t want to discuss the topic of estate planning until after the divorce or death of a spouse. However, if they do not do estate planning, the assets of their blended family may be subject to court supervision. A financial planner with experience dealing with blended families can better understand these challenges and provide a tailored estate planning strategy. In addition, he can use the stepfamily cycle as a framework for advising their clients. For example, a financial planner can consider the needs of a child in determining how assets should be allocated. The conflict of expectations in blended families often arises from unrealistic expectations. While this can be frustrating, it is vital to recognize and manage expectations. Usually, a family will experience high emotional turmoil during the mobilization stage. During this time, family members will try to convince each other of their respective points of view. The stepparent may take a strong position, which can cause tension in the blended family. While many blended families successfully navigate this stage, many don’t.
Need for a mental health professional in estate planning
A financial planner may refer clients to a mental health professional if a blended family has trouble managing assets. This person can help clients address emotional and practical concerns associated with estate planning for blended families. For example, a financial planner can refer clients to a mental health professional if one or both partners are experiencing high levels of conflict. To assist clients, financial planners must have a deep understanding of family systems and the psychology of money. This means listening to their clients actively and knowing how to use economic psychology tools to address client concerns. Money is often the central resource in a family and significantly impacts relationships within the family. This is even more challenging for blended families, who may experience multiple levels of conflict among family members. The landscape of American families has changed over the years, creating more complex financial planning needs. Today, more than 50% of Americans are blended family members. These families typically have children from previous relationships, which complicates estate planning. Determining how to distribute assets and who is accountable for them requires financial planning that incorporates the perspectives of each spouse.
Need for a prenuptial agreement in estate planning
Prenuptial agreements are not just for remarried couples but are an essential part of estate planning for blended families. They protect the assets brought into the marriage. The signing parties should consult separate estate planning attorneys when drafting the prenuptial agreement. Prenuptial agreements foster openness, clarity, and accountability. They are essential in relationships that have a significant amount of assets. They help the couples develop a new estate plan and determine how their assets should be joined and distributed. In divorce, a prenuptial agreement may prevent family members from fighting over the assets. A prenuptial agreement is a legal document that is signed before a marriage. It states the financial rights of both spouses and can minimize disparities of age and wealth between the spouses. Prenuptial agreements can also protect the interests of children if the spouses split up after the marriage.
Need for a joint pour-over trust in estate planning
A joint pour-over trust, or JPOT, combines the advantages of joint and separate estate planning strategies in one document. A JPOT contains separate RLTs for each spouse, which accomplish different planning goals, such as dividing assets between the two spouses and providing for their biological children. In estate planning for blended families, JPOTs are often used to transfer assets to surviving spouses. This is an essential tool that protects the interests of biological children. In addition, a JPOT allows the surviving spouse to direct how assets will be distributed in the event of death. However, there are certain situations in which a JPOT is not appropriate. For example, there may be better situations for a joint trust than a long-term or relatively new marriage. Both partners may be more comfortable with separate estate planning in such cases.
