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Multiple Marriages and Blended Families Create Unique Situations
Planning for incapacity and death in a blended family requires a more complex approach than for traditional families. By its very nature, the blended family has more fault lines. As parents and stepparents age, planning needs to take this fact of modern life into consideration.
Clarifying Roles and Making Decisions About Responsibilities
Roles and responsibilities should ideally be assigned in advance, based on skills and availability. This is not the time to make up for past slights. All of the stepsiblings should be considered in light of their abilities to manage finances, follow instructions for health care decisions and communicate with all step-siblings. Dividing along biological lines may not be the right solution. This needs to be discussed and resolved.
Someone needs to be appointed as the primary decision-maker (known as an agent or attorney in fact) under a health care power of attorney (or proxy) and a financial power of attorney. If a revocable living trust is created, someone will be named to serve as a trustee. Commonly, the person appointed as trustee also serves as an executor under a last will and testament. All children need to know what their tasks require and who has been chosen for which role. Appointing successors for each of these roles is a smart and practical move.
Incapacity Can Be More Challenging than Death
If one spouse becomes incapacitated, usually the well spouse steps in to make medical decisions, manage finances, provide care for the spouse and run the household. If the relationship with stepchildren is good, the well spouse may be able to continue as the primary family contact.
Unfortunately, in many cases, the family dynamic deteriorates when one parent becomes incapacitated. The well spouse may attempt to limit access of children to visit their ailing parent, claiming their parent is not well enough to see them. Assets may be moved to hide them from biological children. If Medicaid planning is done without any involvement from the children, it may appear that assets are being secreted away. Communication between aging parents and stepsiblings needs to address these issues in advance, especially if there are issues within the family.
Managing Expectations for Inheritances
To avoid children being disinherited, trusts can be structured to distribute wealth in a deliberate manner. One strategy is to place assets in a trust for the surviving spouse, so when the second spouse passes, assets will be transferred either to an individual trust for each of the stepsiblings or directly to the stepsiblings as beneficiaries. If all assets from the first spouse pass to the surviving spouse, there is no means of protecting the assets for the biological children of the first spouse and litigation may ensue.
Family Meetings with Professional Advisors
To avoid the potential issues as described above, a series of family meetings where all parents and all stepsiblings are present should be scheduled. Video meetings make it possible to include everyone, regardless of where they live. Incapacity planning, finances, end of life wishes and even funeral arrangements should all be discussed. Expectations should be set for inheritances at this time—it is best for stepsiblings to know what the future holds to eliminate surprises.
Distributing Personal Items to Prevent Family Fights
The biggest fights are often over sentimental items with the least value. To preclude post-mortem quarrels at a time when emotions are running high, a written memorandum disposing of tangible personal property (whether a ceramic frog collection or an heirloom Civil War sword) can be written to clarify which items should pass to which child. The laws of most states provide for this approach, especially when the memorandum is incorporated by reference in a last will and testament. Explaining the decisions may be helpful to keep arguments at a minimum. Alternatively, some parents give sentimental items away while they are living, gifting with warm hands. Both the giver and the recipient can share the sense of passing family belongings to the next generation.
I would love to talk to you about your family’s particular situation and needs. BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.