Estate planning is an essential process for any individual, especially if they have a blended family. There are many inheritance issues and intricacies that may affect how an individual’s property is distributed when they pass away and it may not fulfill their wishes.
An individual can take proactive steps to ensure that their estate is distributed according to their wishes by creating a detailed estate plan. One common inheritance issue with blended families is that step-children are not included in state intestate laws.
Intestate laws are the laws that are followed to distribute an individual’s property when they did not have a valid will in place at the time of their death. The majority of states use the Uniform Probate Code (UPC) as their model laws.
Pursuant to the UPC, close relatives are the first in order of inheritance. This means that, typically, the surviving spouse is first in line, with children and grandchildren to follow.
For inheritance purposes, if children were adopted, they are treated the same as biological children. However, step-children and foster children are not.
This means that if the individual did not adopt their step or foster children, those children may not receive an inheritance, even if the decedent wanted them to. Additionally, any biological children of the decedent who were given up for adoption may not inherit.
It does not matter whether an individual’s estate is large or small, if they have a blended family of any type and they want to ensure that all of their children and loved ones inherit according to their wishes, they should consult with an attorney and create an estate plan. That will provide peace of mind that all of their children, whether biological or not, will receive what they should when the individual passes away.
What Issues May Arise with Blended Families?
Blended families, as they are a combination of individuals who may not necessarily be related by blood, can create complex relationships. In some cases, the children may not approve of a new spouse or the blended children may not get along.
It is essential for individuals in blended families to have patience with one another and have open lines of communication, as parents typically have only the best intentions for their loved ones, especially their children.
Issues may arise between the children regarding who are the “real” children of the decedent or who should inherit more or less depending on who their parent was. It is important for members of a blended family to keep in mind that an estate plan follows the wishes of their loved one, so they should do their best to accept that they are receiving what their loved one wanted them to have.
What Are the Most Important Elements of an Estate Plan?
There are many different legal tools an individual can use to create their estate plan. Some of the most important issues to address and tools to use include:
- Wills and trusts;
- Beneficiary designations; and
- Powers of attorney and healthcare directives.
Wills are estate planning instruments that provide directions for the distribution of an individual’s property, called the testator. The executor is an individual appointed in the will to oversee the distribution process.
Within a will, an individual will make beneficiary designations that state who they want specific property or funds to be given to upon their death. It is essential that these individuals are specifically described and easily identifiable in order to avoid any will contests.
Trusts are created by individuals who own property. The trustee is an individual who holds the legal title to the property that is held in the trust.
This individual has a fiduciary duty to care for the trust assets, which includes safeguarding, managing, and investing the property. The assets that are contained in a trust are distributed to designated beneficiaries.
Powers of attorney and healthcare directives, also called advanced directives or medical directives, are other important parts of an estate plan. A power of attorney gives an individual legal authority to act on behalf of another individual, often in the event of incapacitation.
An individual is considered to be legally incapacitated when their decision-making skills are either temporarily or permanently impaired due to injury, illness, or a disability. Examples of this is when an individual develops dementia as they age or is unconscious after having been in a car accident.
If an individual has a valid power of attorney in place prior to their incapacitation, their named agent will be able to make decisions on their behalf, to the extent they were granted in the power of attorney document. Having a power of attorney in place prior to incapacitation allows an individual to choose who they trust to handle issues for them.
A healthcare directive is a legal document that outlines an individual’s wishes regarding their medical treatment, such as the use of life support or whether or not they want to be resuscitated. This directive is used when an individual does not have the physical ability to make and communicate their decisions for themselves.
With a healthcare directive, an individual appoints a healthcare agent. This individual has the power to make certain decisions on behalf of the incapacitated individual.
An individual can outline the exact duties and powers they want their healthcare agent to have in their directive. Healthcare providers are required to follow valid healthcare directives.
Why Is Asset Management Important?
Asset management is important for any individual, especially one in a blended family. It is important to keep an inventory of assets, such as property, stocks and bonds, and personal items.
An individual should include these items in their will. In addition, when they pass, the executor of their will may have to submit an inventory to the court.
If an individual compiles an inventory of their assets to the best of their abilities before they pass away, it will help ensure the executor can properly do their job and that their assets pass as they wish to their beneficiaries. Another reason asset management is important is in the event of a divorce.
Equitable distribution occurs in divorce cases where courts attempt to fairly allocate the spouses’ property based on the guidelines provided by state law. Asset management is also important to help an individual ensure that their spouse and children are provided for both during their life and after they pass.
What Are Estate Tax Issues?
When estate planning, an individual may be concerned about estate taxes. These are taxes that are paid by an individual’s estate after they pass away that are imposed by the federal government.
Estate tax may also be referred to as death tax or inheritance tax. When the owner of an estate passes away and property or assets are transferred to another individual, these taxes may be imposed.
Most individuals, however, will not owe estate taxes because they are only paid when an individual’s estate is valued at $12.92 million. In 2024, that figure will rise to $13.61 million.
There may, however, be probate and administrative costs associated with probating an individual’s will. The process of probate can be long and expensive.
Because of this, many individuals try to plan and structure their assets to avoid this process and reduce stress on their beneficiaries. Additionally, probate is a public process, so some individuals wish to avoid it so their assets and debts are not made public.
How Do I Choose Guardians and Executors?
If an individual has minor children, they can name guardians for them in their will. Usually, a guardian will fill the role of a parent for a child who is not their own.
If the child has major medical needs or financial assets, the guardian may also obtain guardianship over the child’s estate. An individual will often choose a family member, such as a sibling, to be the guardian for their children in the event of their death.
It is important to consider the financial stability, age, and other factors of the individual who is chosen as a guardian to ensure they will be able to provide for the minor children if required. An individual should choose someone they trust and will be comfortable with.
The same applies to executors and trustees named in a will. Executors, as noted above, help carry out the requests outlined in an individual’s will.
Trustees do the same when an individual creates a trust. Trustees hold the assets in a trust until certain conditions have been met, at which time, the assets are transferred to the beneficiary.
How Often Should I Review My Estate Plan?
It is important for an individual to review their estate plan regularly. It is especially important to review and update an estate plan when a major life event occurs, such as a birth or a death.
It is also important to update an individual’s estate plan if they obtain or sell any assets that are included. This will make the process of distribution much easier and help ensure their beneficiaries receive their property.
Should I Seek Legal Advice?
It is essential to seek the advice of a family lawyer if you have any questions regarding estate planning or you are considering creating an estate plan. No matter how big or small your estate, it is important to ensure that your loved ones are cared for as you wish after you pass away, especially in a blended family.
Your lawyer can explain the laws of your state and how they may affect property distribution in your blended family. In addition, your lawyer can explain steps you can take to ensure everyone receives the property you desire and how to avoid probate, if possible.
