Article | November 11, 2022 | Authored by KDP LLP
Estate planning considerations for blended families
When two people with children from previous relationships get married, they form a blended family. While this can create a unique and loving situation, it raises some complications when considering estate planning and transfer of wealth.
Most of us want to ensure our children and stepchildren are taken care of financially should something happen to us.? However, many are unaware of the ways children can be unintentionally disinherited.?
In this article, we will provide some considerations for blended families. We’ll discuss how to ensure that your stepchildren are included in your estate plan and specifically updated on your estate plan as your beneficiaries and how to make sure that your biological children are never left out.?
What are the inheritance rights of stepchildren??
In most states, stepchildren do not have automatic inheritance rights unless they’ve been adopted by their stepparent. This means that if you die without a will or other estate planning documents in place, your stepchildren would not inherit anything from you.?
If you want them to be able to inherit from you, you need to include them in your estate plan. You cannot simply say, “I leave my assets to my children,” in your will, as this may not legally include your stepchildren. You must explicitly name your stepchildren as beneficiaries to ensure they are included.?
Another huge consideration is whether or not your stepchildren are entitled to a share of your pension or other retirement benefits. These assets are typically left to designated beneficiaries and pass down outside of a will or trust. These assets will require you to list all heirs by name and percent of the asset to go to them. Specifically naming your stepchildren as beneficiaries ensures that they are included. With that said, your ability to designate beneficiaries will vary depending on the rules of the particular retirement plan, so it’s essential to check with your plan administrator and/or wealth advisor to find out how to properly plan for the disposition of retirement benefits.?
How children of divorce are unintentionally disinherited
In some cases, biological children may be unintentionally disinherited if their parents’ divorce and remarry. This is common with adult children as well. For example, let’s say John and Jane Doe have a child, Henry. John and Jane both divorce and each re-marry. If John Doe dies and leaves everything to his new spouse in his estate plan, his biological son Henry will not automatically be entitled to inherit anything from the new spouse unless she explicitly includes Henry in her estate plan.?
This is one of the most common ways children are unintentionally disinherited.?
Since Henry would be the stepson, he would not receive anything from his dad’s estate, nor his stepmother’s estate when she passes, unless she thought to include him as a beneficiary in an estate plan. If your mind is racing, know that there are some specific wealth strategies that can help with this exact issue.
Protecting your children
No matter what your family dynamic is, it’s important to take into account how your estate plan and designated beneficiaries will affect your children. If you have stepchildren or children from a previous marriage, it’s worth planning around their needs as well as your desires for the transfer of assets. With careful planning, you can ensure that your children are taken care of regardless of what happens to you. This is one of the many topics we discuss at KDP Wealth Management when looking at your complete holistic wealth strategy.
The information contained in this article is provided for general informational purposes only, and should not be construed as legal advice on any subject matter. You should not act upon any such information without first seeking qualified professional counsel on your specific matter.
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