Blended Family? Second Marriage? 3 Things You Need to Know About Estate Planning

If you’re in a blended family with stepparents, stepchildren or step-anything-elses, you have unique estate planning needs.

Brenda* is all too familiar with the pitfalls of estate planning for blended families. Her stepmother is trying to disinherit her and her sister by draining a trust meant for them.

Her father came into wealth in his later years. He and his wife updated their wills before going on a trip to Europe. As a result, the estate planning—including the trust—was completed quickly.

Unfortunately, the trust fund Brenda’s dad set up was poorly written. (What is a trust fund, exactly?)

He meant to divide his estate between his biological children (Brenda and her sister) and his stepchild (his current wife’s daughter). However, the stepmother found a loophole letting her dip into the fund at any time to fund her lifestyle.

It’s been a three year battle to contest the will.

If you’re on your second (or third or fourth or eleventh) marriage, or if you have a blended family of any sort, listen up.

Estate Planning for Blended Families

Writing a will isn’t exactly the most fun, but it’s important. This is particularly true for blended families.

Dan Murphy, a financial planner at Greater Good Financial, has three children from a previous marriage and one with his current wife. Although everyone is on good terms, he recognizes that anything can happen.

“My wife loves my girls, but it’s a different kind of love,” he says. “I made sure to set up a QTIP (qualified terminable interest trust). That helps ensure my assets provide for my wife and my children.” After all, when he dies, his wife could theoretically disinherit his biological kids from his previous marriage. He took steps to prevent that from happening.

Creating a robust estate plan helps to ensure your wishes are carried out and that all parties get their fair share. While every blended family has its own unique circumstances, there are three main areas to think about:

1. Legal guardianship

2. Passing on assets to minor children

3. Dividing your estate among family members

We'll dive into each.

1. On Your Second Marriage? Figuring Out Legal Guardianship

If you pass away without a will, your child’s other parent will typically get full custody. According to Rebecca Greene Neale, a divorce and estate planning lawyer in Massachusetts, the main exception is if the surviving biological parent had extremely limited visitation rights (think supervised visits or only once-a-month visits). In that case, the stepparent may be more likely to gain guardianship of the child.

If you and your previous partner are estranged or you want your child to remain with your current spouse, you’ll need to make that clear in your will. Even so, this may not solve everything. (Here's what you should know financially if you get a divorce.)

“A parent can appoint their spouse as guardian, but the estranged parent will have to consent to the appointment,” Neale says. “Otherwise, the surviving stepparent will likely have to initiate proceedings after the custodial parent has passed.”

Guardianship is extremely state-specific, so consult a legal professional from your state.

2. Taking Care of the Kids in a Blended Family, Financially

Leaving your estate to your children adds another layer of complexity. It's important to think about who you've designated for your payable on death accounts, but that's often not enough. For example, some divorce or custody agreements require that parents maintain a certain amount of life insurance to benefit multiple children. (Here's more on how life insurance works.)

The idea behind this rule is to “make up” for any lost caregiving or child support that you would have provided otherwise. In some cases, you might even choose to take out a life insurance policy on your ex-spouse to ensure your child has some protection.

“A minor child cannot inherit life insurance proceeds outright, so there needs to be an appointed trustee for the funds,” Neale says.

That’s an adult whose responsibility it is to act as the legal owner of assets. They control these assets on behalf of a will beneficiary who’s a minor (since a child isn’t allowed to be at the helm). This person is supposed to maintain and manage this money in a responsible way until the child reaches adulthood.

“In blended families it can be tricky to agree on a trustee,” Neale says, “but no matter who it is, the trustee needs to be clearly designated in your will.”

3. Dividing Belongings Among a Blended Family

When it comes to second marriages with stepchildren, you need to make sure that the language in your estate planning is rock solid. Otherwise, it could lead to conflict among your heirs.

Tiffany Hilliard Lipscomb, an expert in the probate process and estate planning, recommends including specific language about each child so that there are no mixups as to who is entitled to certain parts of your estate. That way, there is less of a chance of anyone contesting your will.

This is important because if the language of the will is called into question, the entire document can be thrown out. Then you’d die intestate, meaning without a will.

When you die without a valid will, most states will generally grant most of the estate to your current spouse. The remaining amount will be split amongst children, which can include biological or stepchildren.

This can lead to unintended consequences, such as your estate going to stepchildren (if that isn’t your wish). To make it even more complicated, let’s say your spouse were to pass away shortly after you. In that case, your spouse’s share would generally go to his or her biological children. That may mean that your own children from a previous union could get left out. Want to add to the confusion? If you and your partner aren’t married but live in a common law state such as California or Texas, the rules for estate planning may be different.

For a deeper dive, check out our guide on how to handle life insurance when you're divorced.

All this to say: The language in your will needs to clearly define how you want your estate to be divided.

Don’t Overlook the Emotional Burden (and Relief!)

Estate planning can be very emotional, especially if you have a blended family. This may not be a pleasant task, but remind yourself that you’re doing it for your spouse and children.

When Murphy drafted his estate plan with his current wife, it was emotionally and mentally draining. However, he believes it was totally worth it.

“I felt like I had to balance everyone’s happiness. I had to consider my wife, ex-wife and my children in every decision,” he says. “But I got through it. I feel great knowing that I’ve set a plan in place for everyone’s future.”

*Name changed to protect this person’s privacy.

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