While blended families come together in life, they aren't always treated equally after a parent dies. If you are currently part of a blended family (if you are in your second marriage and have your own children and step-children), then it pays to think about how your death would affect their financial rights and circumstances. An estate plan helps you do this. Read on to learn why this process matters.
What Happens if You Don't Have an Estate Plan?
Some people don't think that they need a formal estate plan. However, if you don't plan ahead, then you can't control the way your estate is divided after your death. Some of your family could be left with nothing.
For example, you might agree with your spouse that they will take care of your children as well as their own after your death. They agree to divide their estate equally when they die. However, you have no guarantee that this will happen if you don't set up legal documents. By law, your spouse will inherit your estate. This means they can do what they want with your assets and money. If their relationship with your children breaks down in the future, your children might not inherit anything. Or, your spouse might split the inheritance you wanted to leave to your natural children with their own family.
While you can mitigate against this risk by leaving your money to your children, this can disadvantage your spouse. Your children might agree to look after their step-parent but they don't have to.
Even if your family follows your wishes, your children might not get the financial benefits you expect. For example, your surviving spouse might spend most or all of your assets if they have many years of life left. Your children will inherit less than you wanted them to.
What Happens if You Have an Estate Plan?
During the estate planning process, you get guidance on how to legally control your assets and money after your death. You ensure that your wishes are followed. You can also maximize the benefits you give your loved ones.
For example, you can put your assets into a trust to protect your spouse and your children's inheritance after your death. The trust gives your spouse the right to remain in your home and access your assets in a reasonable manner for the rest of their life. The assets in the trust then pass to your children.
An estate plan can also speed up the inheritance process. For example, if your spouse is likely to live for a long time, then your children could have a long wait for their inheritance. To speed things up, you could include a life insurance policy in your plan. If you name your children as your beneficiaries, then they inherit immediate cash without taking money out of your estate.
For more advice, contact an estate planning attorney.