When you start a blended family, it’s understood that things are going to get a little more complicated. You may have to juggle spending time with your children and stepchildren, or work to maintain a healthy relationship with an ex-spouse. You can no longer simply concern yourself with the family living under your roof. And when it comes to money plans, there are unique issues too.
Blended families can have intricate money needs. It doesn’t get any simpler when it comes to estate planning. There are unique considerations blended families need to take into account. Here are some of the most important things to consider when estate planning for a blended family.
Check Your Beneficiaries
If you’re divorced and remarried, double-check the beneficiaries listed on your life insurance, retirement and bank accounts. In most states, the beneficiary named on the policy or account records will receive the funds—even if you later name someone else for that same asset in your will.
Changing the beneficiary on your will is not enough. So for example, your ex-spouse or partner may still receive the assets from your retirement accounts even if you name your current spouse in your will. Some estate planning advisors instruct people to avoid this issue by not naming a beneficiary on your account. However, that can have its drawbacks too.
Each financial firm has its own rules for who gets the money when you don't designate a beneficiary. Without someone named, some firms may distribute the assets first to the spouse, then children and lastly to the estate. Others may do it differently. To help avoid your investment accounts getting hung up in probate, you may want to name beneficiaries on retirement accounts and provide transfer-on-death instructions on non-retirement accounts.