Estate Planning Basics for Blended Families
According to the US Census Bureau, the number of Blended Families outnumber Traditional Families in the United States. A Blended Family is a family that consists of children from previous marriages – think of the television show – “The Brady Bunch.”
Blended Family Estate Planning Challenges
Blended Families create their own unique set of estate planning challenges. Did one spouse bring significantly more assets to the marriage than the other spouse? Has this second marriage lasted three years or thirty years? What is the relationship between a spouse and the step-children? Is the intent to make sure a surviving spouse is cared for upon the first spouse to die – or does the surviving spouse have sufficient assets of their own to care for themselves? Is the intent for each spouse to leave their assets to their own respective children?
Blended Family Estate Planning Analysis
When working with clients that have Blended Families, I go through the following steps to help them decide how to structure their estate plan:
1. Inventory each Spouse’s Assets. A lot of times people don’t realize what assets they have. Also with Blended Families, we determine what assets are “his”, “hers” and “theirs”.
2. Explain the difference between “Probate Assets” and “Non-Probate Assets”. Once we have a list of assets for each spouse – we then need to classify each asset as either a “Probate Asset” or a “Non-Probate Asset.” This is a fundamental concept of estate planning and it has a huge impact on estate planning.
Probate Assets are assets that DO NOT automatically transfer to your heirs upon your death. Your Will tells everyone who inherits your Probate Assets when you die.
Non-Probate Assets are assets that DO automatically transfer upon your death. These are assets that have beneficiary designations (i.e. life insurance, retirement accounts), are jointly owned with someone else, or are held in a Trust. We have to look at the terms of the beneficiary designations or the Trust to determine who inherits Non-Probate Assets.
3. Explain Surviving Spousal Rights upon Death. In Illinois, a surviving spouse is entitled to
their “Illinois Spousal Share.” For Example - if a deceased spouse dies with a Will that states their children inherit everything, Illinois law allows the surviving spouse to elect their Spousal Share and take 1/3 of the Probate Estate anyway. Note: The Spousal Share does not affect “Non-Probate” Assets.
4. Explain What Happens if You Die Without a Will. If a person that is married with children dies in Illinois without a Will, half of their Probate Assets go to their surviving spouse and the other half of their Probate Assets are split among their children. We look at beneficiary designations to see who inherits Non-Probate Assets.
By going through this estate planning analysis, Blended Families have a better understanding of their estate and can use Wills, Trusts, life insurance, and beneficiary designations as tools to create an effective estate plan that will leave a positive legacy to their intended heirs.
This article is a service of Attorney Chad A. Ritchie and the Ritchie Law Office, Ltd.
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