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Estate Planning for the Blended Family: A cautionary tale

Marianne Blackwell

Recent Census Reports indicate that approximately 1,300 new stepfamilies are forming every day, and over 50% of US families are remarried or re-coupled. Blended families are the norm and require different estate planning than families that are not combined. To understand why, let’s consider the following story:

George and Gracie married in 1995 and had 1 child. They divorced in 2005, and 3 years later, Gracie remarries Fred who has 3 children. Gracie and Fred come to me and want an estate plan that will take care of each other and include specific gifts to their kids.

Frank in particular wants his 3 children to share the house in Gunnison that was passed down to him by his mother. He dreams that his grandchildren and their children will be able to enjoy that home like he did when he was little. On her side, Gracie’s father left her his antique coin collection and she loves the memories of learning about old coins from him and sharing these stories with her daughter. She wants her daughter to inherit the collection when Gracie passes.

They each have a will they prepared online years ago, leaving everything to each other. The plan was always that the surviving spouse would take care of the 4 kids who were all minors when the wills were signed. They never had time, interest, or money to update this original, simple plan. Now, the kids are all adults and the couple wonders what would happen if one were to pass away unexpectedly with this plan in place. Well, here is what could happen:

If Fred dies first, Gracie inherits his estate, including the house in Gunnison. Because he didn’t include anything in his old will specifically for his kids, they do not legally inherit from their father. Unless Gracie made provisions in a subsequent will, none of Fred’s children are entitled to anything from Gracie’s estate. When Gracie later passes, her child will take her entire estate, including the Gunnison property or the proceeds from the sale if Gracie decided to sell it. Vice versa for Gracie’s daughter if her mother predeceased Fred. It’s easy to appreciate that neither Fred nor Gracie would want these possibilities to come to fruition.

As you can see, the estate plans for blended families need special care and attention.

Here’s how Fred and Gracie could design a new and more equitable plan. We create a joint trust for Fred and Gracie and put their joint assets in the trust. When the first spouse dies, the survivor benefits from the use of those assets and when the surviving spouse passes, the remainder is divided equally among their surviving children. We add in flexibility and purpose to the Fred and Gracie estate plan: We include a trust provision that makes an outright gift of the Gunnison property to his kids through the trust at Fred’s death or we can prepare a beneficiary deed that will go into effect at his death and leave the ski property directly to his kids. We create a similar provision that provides Gracie’s daughter receives the coin collection from the trust or from a separate will that we also prepare for Gracie. With this planning in place, Fred and Gracie breathe a sigh of relief, knowing that their goals will be met.

If you have a possible Fred and Gracie situation, let our estate planning team help you make a plan that meets your goals! Call (303) 622-5502 or contact us online for a free consultation to learn more about your own blended family estate planning options.


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