Webster’s dictionary defines a blended family as a family that includes children of a previous marriage of one spouse or both. The first known use of the term blended family was in 1975. Blended families may consist of young couples with “his” and “hers” and “our” children or older couples with adult children from previous marriages and no children of the current marriage.
The divorce rate in Michigan as recently as 2011 was 38%. This figure does not differentiate between first marriages and subsequent marriages and does not account for subsequent marriages of widows and widowers or marriages of those with children from previous relationships other than marriages. All told, the number of married couples who have children of any age that are not a product of the current marriage is a significant and expanding number.
For the estate planning practitioner this brings additional challenges and planning opportunities to the table. Among these additional issues are such questions as: who is the client? Do you have a conflict of interest in representing both spouses? (not a question unique to blended families) who should act as an agent under a DPOA or as trustee of a trust (adult child vs spouse)? Or as a patient advocate?
Often these can be delicate and sensitive conversations with a couple. Many couples will begin the meeting believing that they are on the same page but find as they walk through different scenarios with the attorney they have very different visions for how their assets are to be divided when one or both of them pass away. The estate planning attorney must use great finesse in navigating these issues and ultimately may have to suggest separate counsel if the couple cannot come to agreement.
Estate plans for these families will consist of a combination of documents. Wills and trusts may be used to hold and manage assets after the death of the first spouse, but decisions will need to be made regarding the use of joint trusts, separate trusts, QTIP trusts, and sometimes continuing trusts for family cottages or educational funds.
Post-nuptial agreements (and ideally pre-nuptial agreements if the client happens to come in before they marry) can be very helpful in establishing not only separate property but also in dealing with statutory spousal allowances and rights that may interfere with or override the established estate plan.
Beneficiary designations are often overlooked by the client but can control the largest portion of an individual’s estate plan if they have retirement or investment accounts and practitioners need to be aware that there may be existing QDRO’s in place from a divorce and that ERISA rules may require a current spouse to waive their rights to some plans if the individual chooses to name a child or trust as a beneficiary.
Other tools that may be effective in an estate plan for blended families include life insurance to provide cash to a surviving second spouse, a right to occupy a residence (not the same as a life estate which continues even if the surviving spouse resides in an institutional medical setting), re-titling of financial accounts and real property, and a detailed list of tangible personal property to be distributed to children immediately upon the death of the first spouse.
Each situation and the family dynamics of each couple will make the estate plan unique. It is important for the practitioner to spend time listening to the clients carefully. Asking thought provoking questions to flush out the topics that may create disputes when one or both spouses die is important so that a careful plan can be created to meet the needs and wishes of the client.