When a couple marries later in life, and they each have children of their own prior to the marriage, estate planning becomes even more critical. When one spouse dies, the children of that spouse can be in conflict with their step-parent. Likewise, we often hear a spouse in the blended couple marriage say something like, "I don't want my spouse's children to kick me out of our home after my spouse dies."
This post focuses on three different ways you can leave assets to your children, your spouse, or both, when dealing with a blended family.
(1) Directly to Children. I was working with a blended family recently. The wife had inherited funds from her father. Before he died, the father requested that his daughter leave assets to his daughter's children. So, the wife is now wanting, even if she dies before her husband, to leave assets directly to her children, bypassing her husband.
(2) Directly to Spouse. I was working with a couple. While the husband and wife each had their own children, the husband was very clear that he wanted his wife to 100% own the home if he predeceased his wife. He knew that his children may never get any benefit from the home he currently owns with his wife, but that was OK. Some people are comfortable leaving full ownership of assets to their spouse.
(3) Trust or Louisiana Usufruct. A middle ground can include leaving assets in trust when you die. The concept is to leave assets to a trust when you die, and arrange the trust so that your spouse can use trust assets for your spouse's health, maintenance, and support. To the extent your spouse does not use the trust assets during your surviving spouse's lifetime, then the trust assets will revert back to your heirs or beneficiaries when your surviving spouse later dies. This is a way that you can both provide for your spouse AND your children, even if you are in a blended family situation. The Louisiana usufruct is another way to make assets available for your spouse, but revert back to the naked owners when the usufruct terminates. There are significant differences between leaving usufruct to your spouse, and leaving assets in trust for your spouse. Understand these differences now so that problems don't surface later.
The potential for problems in the estate settlement is greater with blended families. Children often remain quiet while their parents are alive because they don't want to rock their parent's boat. But once the parent dies and children must share an inheritance with their former step-parent, it often gets tense. Planning ahead, the right way, the first time, is the key to having a shot at keeping family relationships intact and prosperous.
This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.