Estate Planning & Probate Avoidance for Blended Families

Crafting these documents can be tricky enough in any circumstances, but with the wonderful gift of a second marriage, there are also added complications when it comes to writing up your estate plan. It is possible that you and your spouse have had children together, and that you also have had children from prior relationships. You could also have each brought a good deal in separate property into the marriage. Now it is only natural that you want to make sure that your property goes mainly toward your spouse and your children, but actually spelling these wishes out in your estate plan can be a complex process. Yet there is no way to ensure that your wishes will be honored until you have your estate plan in place.

General Tips for Deciding on Your Estate Plan

You will have to create a unique plan for your family, as there is no cookie cutter solution. You may need to carve out some time to yourself to review your main assets, such as a house, car, valuable, investments, insurance, retirement accounts, etc. What do you want to happen to this property after you and your spouse pass away? If you have insurance policies or retirement accounts, then you need to make sure that you have updated the beneficiaries you've named. Jot down a list of the specific assets that you want to pass down to your children; a vague designation can lead to disappointment if a child does not get a specific item they had anticipated, regardless of its actual monetary worth. Once you know what you want, you still have to research creative ways of making these wishes happen.

An Example of an Estate Plan that Avoids Probate

Let's say that when John and Jane get married, it's the second marriage for both of them. John has an adult daughter and Jane has three sons. Let's also say that John owns a business and has investments, while Jane owns a house and has bank accounts and stocks. We could take each asset in turn to see how a blended family might create their own unique estate plan:

• The House: Jane brought the house into the marriage having inherited it from her parents, and she wants this real estate to get passed down to her sons. But she also wants to ensure that John will live in the house for as long as he wants to after she passes away. After discussing the matter, John and Jane decide to put the house and Jane's valuables into an AB living trust, which will shield this property from estate taxes and probate. In this way, after Jane's death, John gets the house. Then after he passes away, Jane's sons will get the house.
• The Family Business: John wants his daughter to take over the family business, where she already works. So he creates a living trust, in which the business assets are placed. He names his daughter both the beneficiary and successor trustee of the business. The trust will also ensure that the business will stay out of probate court (further research may be needed down the road to find out how to evade estate tax).
• Her Bank Accounts & Stocks: In order to name her sons as the payable-on-death (POD) beneficiaries (or transfer-on-death beneficiaries) of her stock and bank accounts, Jane calls up her stockbroker and bank to get the forms that they use to create these arrangements.
• His Investments: John wants to leave stocks and bonds to a few charities. While making the charities the TOD beneficiaries of these securities would mean that these assets bypass probate, there are the estate taxes to think about. John contacts his charities to ask about charitable gift annuities or a donor-advised fund, and these options seem to give the charities more money while giving him tax breaks while he lives. John has to weigh the benefits of avoiding probate against the benefits of estate tax avoidance, and his charities are eager to help him out in this decision.

What about the leftovers? Anything the above documents and procedures do not cover can be dealt with in each spouse's will. These leftovers would go through probate then.

Find Your Unique Solution

State laws will affect the availability of certain estate planning documents and the way you would go about creating them. Also, the above example is simply meant to give one illustration of the many possible ways you could tailor your estate plan to your family's needs and wishes. Get the advice and counsel you need for these crucial legal documents when you call a probate attorney from our directory today!