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  • Home
  • About Us
    • Gratia Schoemakers
      • Community Outreach Program
    • Testimonials
  • Virtual Services
  • Estate Planning
    • Estate Planning Basics
    • Last Will and Testament
    • Revocable Living Trusts
    • Durable Power of Attorney
    • Medical Power of Attorney
    • Living Will
    • Family Estate Planning
    • LGBTQ Estate Planning & Asset Protection
    • Kids Safety Plan™
    • Business Succession Planning
    • Guardianship
      • Guardianship Planning
    • Special Needs Planning
    • Legacy Preservation Planning
    • Asset Protection
    • Trusts
    • Pet Trusts
    • Gun Trusts
  • Probate
    • Texas Probate Guide
    • Probate of a Will
    • Texas Affidavit of Heirship
    • Texas Small Estate Affidavit
    • Texas Heirship Determination
    • Texas Muniment of Title
    • Trust Administration
  • Family Law
    • Divorce
    • Collaborative Divorce
    • Mediation
    • Custody / Visitation
  • Blog
  • FAQs
    • FAQs – Videos
    • FAQs – Estate Planning
    • FAQs – Beyond Money in Estate Planning
    • FAQs – Divorce and Estate Planning FAQs and Myths
    • FAQs – Estate Planning for Newlyweds Myths and FAQs
    • FAQs – Estate Planning for Young Adults
    • FAQs – The Estate Planning Cast of Characters
    • FAQs – Expecting an Inheritance
    • FAQs – Myths and FAQs – Planning for Conflict Prone Families
    • FAQs – New and Expanding Families
    • FAQs – Pet Trusts
    • FAQs – Probate
    • FAQs – Standalone Retirement Trust Myths and FAQs
    • FAQs – Trust Modifications
    • FAQs – Unwinding Obsolete Planning
    • FAQs – Why You Want to Avoid Probate
    • FAQs – Year-End Planning Myths and FAQs
  • Contact
    • Virtual Estate Planning Login
    • Client Portal

Beneficiary Designations and a Blended Family: Why You Need to Think Before You Sign

August 23, 2018 By Gratia P. Schoemakers, Esq.

Whether you are in your first marriage or have remarried after a divorce, blended families are a common part of modern society. That being said, it is important to understand that blended families and subsequent marries create important and unique issues when it comes to estate planning. You may need to account for a prior spouse who is still caring for minor or disabled children, and also possibly make sure your current spouse and any children you had together – and any step children – are also taken care of after you pass away. The good news is that estate planning can take all of these factors into account. This is true whether you are putting together your estate plan for the very first time or if you need to update your current estate plan due to a change in your circumstances.

Setting Up a Trust

It is common for married couples to leave everything to one another in their wills, or list their spouse as the sole beneficiary of any assets that allow for this designation. The result is that if one spouse passes away before the other, the surviving spouse will own all of the assets left behind outright. While this may work for some families, when it comes to blended families this strategy may inadvertently disinherit children or spouses from a prior marriage. One way to provide for a current spouse without leaving out children from a prior marriage is to place some or all of your assets in a trust that the spouse can use during his or her lifetime. Once the spouse dies, all of the property in the trust can go to the children from your current and prior marriage, or to other intended beneficiaries.

Beyond Simple Beneficiary Designation

The plain and simple beneficiary designation on assets (like life insurance, bank and investment accounts, etc.) that allow for outright distribution to the surviving spouse can inadvertently wreak havoc on an estate plan when a blended family is involved. These complications can apply to a couple who has children from prior marriages, someone who remarries late in life, or someone on their second or third marriage and beyond.

For example, you may purchase a large life insurance policy and designate your current spouse as the sole beneficiary and pass away shortly thereafter. Since the beneficiary designation takes precedence over your estate planning documents, the proceeds of the life insurance will not be placed in that trust and will be distributed outright to your current spouse. If you had instead named the trust as beneficiary, you could have determined when and how the funds would be spent for the benefit of your heirs. As an example, the funds could be used to provide support for your surviving spouse during his or her lifetime while also allocating a portion to help your children to pay for college, finance a down payment on a first home, pay for a wedding, or start a business. The key is that the money can be available for your spouse, but not with unfettered control, and still available for your children.

Ensuring Your Wishes Are Followed

While you hope that a surviving spouse with honor your wishes even if they are not in writing, you may accidentally disinherit your children. Instead, a knowledgeable estate planner will use your trust as the centerpiece of your estate plan and make sure to coordinate and align the beneficiaries on your assets so that your intent will become the reality once you have passed away. We can explain all of the options available to you and put together a plan that best suits your family’s needs.

Call or contact us today, we are here to help.

Filed Under: Divorce, Estate Planning, Trusts Tagged With: Beneficiaries, Insurance, Life Insurance

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