BLENDED FAMILIES AND ESTATE PLANNING ISSUES
Societal changes over the past 50 years have resulted in dramatically different definitions of family. The average marriage now lasts only 7 years; 50% of marriages end in divorce. Approximately 75% of people who divorce will re-marry. Many of these divorced and re-married couples have children from their previous marriages, then add to the family once together. The new phenomenon now known as "blended families” is having a definite impact on estate planning, and has complicated the methods for handing down family assets from parents to children.
Families are seeking specialized legal and estate planning advice more often than ever before to be sure of how to proceed with distributing assets to their surviving children. It is necessary for spouses to:
Identify the objectives for each spouse in regard to what assets are to be distributed to children of previous marriages as well as those born with the current spouse;
Develop a consensus about family assets that is supportive of both spouses common goals without having a negative impact on either spouse or their surviving children;
Seek professional guidance and counseling when there may be discomfort re-visiting former spousal issues with your current spouse in order to reach estate planning decisions.
There are a number of areas where distribution of assets will be impacted by each spouse’s previous life experience. Some of the most common sources of estate planning challenges for blended families include Gift Planning and Retirement Assets.
Gift Planning is a strategy often employed where families have a revocable trust that distributes assets to minor or adult children over a period of time. For example, a parent may choose to gift money on an annual basis to a child for tax purposes, and with the condition that they are to receive disbursements once they have reached a certain age. At age 18 and subsequent periodic times, the parent may have scheduled disbursements so that the child does not spend all of their inheritance with youthful exuberance and a lack of good judgment.
There are significant tax rules that govern tax liability for monies that are gifted to children, which may impact the tax position and future income of a surviving spouse.
Retirement Assets. In the event that a divorced spouse had a property settlement from their ex-spouse that included retirement plan assets, there may be questions about their continuing rights to such benefits when their previous spouse re-marries.
This article, Blended Families and Estate Planning Issues, was written by Attorney Richard P. Bourne-Vanneck of St. Thomas, U.S. Virgin Islands.
© Copyright 2015 Law Offices of Richard P. Bourne-Vanneck. All Rights Reserved.