Estate Planning for Blended Families

In previous articles, we have talked a lot about the importance and the process of estate planning. If you are unfamiliar with the term, estate planning is the preparation of tasks that serve to manage an individual’s assets in the event of their death. At Loveland Law Firm, we take a holistic approach to estate planning; taking into account family dynamics, asset structures, classification and investments, and client goals.

Often a person may not start their estate planning until later in life, at which point they might be part of a blended family. A blended family is where one or both spouses have children from a previous marriage. This can be problematic as each spouse may want to provide for their children and their stepchildren after they pass away, or some may have tenuous relationships with their stepchildren. So the question then becomes, how should one prepare their estate plan if they are part of a blended family?

Texas, Arizona, California, Idaho, Louisiana, Nevada, New Mexico and Washington are considered the traditional community property states. In community property states, marital assets are typically classified as the spouse’s separate property, the other spouse’s separate property, or their community property. These classifications affect the distribution of property in the event of death or divorce. There is generally a presumption that any property owned by either spouse or both spouses during or upon divorce is community property. Accordingly, absent an agreement of the parties or other unique situation, community property generally includes all personal earnings of both spouses earned during the marriage (whether in the form of wages, salaries, etc.), along with the rents, profits and other fruits of those earnings (i.e., income and gain generated by community property). Property purchased with community property during the marriage is also community property. The title of a property is not typically determinative of ownership.

In Texas, it is imperative to have an estate plan if you have a blended family. Without one, the property division results may be less than desirable. If you die without a will (intestate) in Texas, separate property is distributed with the surviving spouse receiving 1/3 of personal property and a life estate only in 1/3 of real property; the balance passes to decedent’s descendants.

Regarding community property, in the case of a nuclear family, all of the decedent’s estate passes to the surviving spouse. If the decedent has children or descendants from a prior marriage, ½ of the estate passes to surviving spouse and the other ½ passes to decedent’s descendants in equal shares. This means you could own property with your stepchildren. In any event, the surviving spouse retains the survivor’s half of the community. Comparatively, if you have an estate plan, at the death of the first spouse to die, such spouse’s Will or Trust controls the disposition of all of such spouse’s separate property and one-half of the community estate; thus, avoiding less than desirable ownership interests with children from a prior marriage.

Creating an estate plan involves understanding your goals, your partner’s goals, and how you want to provide for each other and your children. Estate planning involves reviewing obligations to former spouses under divorce decrees and federal and state tax laws governing your assets. Furthermore, absent a marital agreement, surviving spouses have statutory rights that are unfamiliar to many people. These rights may include a homestead right of occupancy or some type of allowance. In some instances, a marital agreement may be recommended to clarify spousal rights and property classification, especially if there are significant separate property assets (assets acquired before the marriage or through inheritance). These conversations can be challenging and can be facilitated by including an estate planning attorney.

One of the first steps you should take after putting an estate plan in place is to ensure your beneficiary designations are up to date. A beneficiary designation is the description of the person or persons you want to receive a specific asset upon your death. If these designations are not updated, you may inadvertently pass your assets in a manner that does not flow with your estate plan. At the death of the first spouse, assets with valid survivorship rights pass non-probate to the named party and should follow your intended estate plan.

Trusts hold assets for beneficiaries. They detail how and when the assets go to the beneficiary. Without a trust in place, assets may go through the public probate process. Trusts can be beneficial to avoid probate and keep distributions and assets private. Trusts can be used to hold assets for the surviving spouse’s benefit for their life while ensuring assets are maintained and preserved for children from a previous marriage upon the surviving spouse’s death. This is especially true if there is a concern for remarriage upon the death of the first spouse. Blended families can benefit from trusts that can provide financial support for your spouse while leaving assets for your children.

Estate planning for the blended family can be complicated and emotional. It requires communication, thought, and carefully constructed legal documents. Working with an estate planning attorney such as Kimberly Loveland will ensure the process goes smoothly and that the documents will be legally binding.

Attorney Loveland is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization and licensed to practice in Texas and Florida. Loveland Law Firm focuses on every client and family’s uniqueness and hopes to educate every client regarding estate planning and probate. You may schedule an in-person meeting, phone conference or video conference through the schedule an appointment page on our website.

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