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Blended families face estate planning complications

How would you like your ex-spouse to inherit your house, your bank accounts and your retirement benefits despite the fact you willed them to your children? What if your father's estate wound up in the hands of your stepbrother even though dad promised the farm to you?

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Such heartbreaking inheritance snafus happen with some regularity to blended families, in which husband, wife or both bring together assets and children from a previous marriage.

Blended families now outnumber traditional nuclear families in the United States, according to the U.S. Census Bureau, and the trend is expected to continue as divorce rates climb and we live longer, creating a greater pool of eligible widows and widowers.

Estate planning for blended families is complex, and potentially caustic. The strictly monetary decisions are difficult enough. But the very circumstances surrounding the merging of two families, typically divorce or the death of a spouse, often emit added emotional and psychological radiation that can have considerable and unpredictable effects.

Accounting for new family and old ties
Unlike the traditional husband-wife-and-children model, blended families must take into account yours, mine and ours, plus, in many cases, ex-spouses and multiple sets of grandparents.

The disparity in the ages of the newly-reweds, as well as the ages of their children, also can have major ramifications for estates. And let's not forget that yarn ball of tangled state and federal case law that relates to retirement plans, life insurance, estate taxes, wills and probate issues.

It's only natural to want to pass on the fruits of your life's work to your biological children. But you also want to provide for your spouse and create one happy and loving family from your two broods. It's a delicate balancing act.

"There are previous children that need to be taken into consideration," says Gary S. Williams, a Certified Financial Planner in Columbia, Md. "I think it's fundamental to have a perception of fairness to all children involved."

Even when the blended family members seem to get along, financial planning can be complicated. The potential for suspicion, acrimony and worse among skeptical siblings (and half-siblings and step-siblings) can be so great that some folks simply choose to avoid addressing the issue of inheritance altogether, sometimes until it's too late.

And the best of intentions still can go awry. Kyle Krull, a CFP and estate-planning attorney in Overland Park, Kan., has seen it happen firsthand.

-- Posted: Aug. 25, 2003




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