News and Commentary

4 Estate Planning Tips for Blended Families By Kathleen Marteney, CRPC®

When second and third marriages result in the blending of two families, a complicated financial picture may emerge. Couples coming into a second or third marriage bring with them ex-spouses, children from previous relationships and financial responsibilities, assets and liabilities that may carry deep emotional attachments. Addressing these delicate issues from the onset will help newly blended families avoid a rocky road of financial disputes in the future. Following are some key points to consider.

Communicate

Disagreements over finances are a common source of marital discord. Spouses may enter a marriage with different financial assets, responsibilities and spending habits. Moreover, both parties should take an honest assessment of the new family dynamics their union will create, and identify potential challenges that may arise in the future should blended family members fail to get along or should the death of one spouse result in a change in a child’s inheritance. Tackling these issues early on may help to lay the foundation for a financially harmonious future.

Draw Up a Prenuptial Agreement

Prenuptial agreements that establish a plan for division of property in the event of divorce may not be the most romantic topic for couples planning a long future together. However, they are one of the most critical instruments in the blended family toolbox, especially when it comes to protecting surviving spouses and safeguard inheritances for one’s children. Not only can a prenup help couples begin a dialogue of who is coming into the marriage with what, but it can also allow both parties the opportunity to articulate and agree on their individual and combined concerns, goals and responsibilities before actually saying “I do.”

Review and Update Estate Plans

While engaging in open dialogue, it’s a good idea to document the assets both parties bring into the marriage and the value of those assets, which may become the subject of property divisions in a divorce and a source of contention among surviving family members following one or both spouse’s deaths. A new marriage may require changes to legal names and updates to beneficiaries on wills, insurance plans and retirement accounts.

Create a Trust

Putting assets in trust can accomplish several goals, not the least of which includes shielding assets from creditors and the very public process of probate after a spouse’s death. For the blended family, a trust provides the grantor the ability to direct how assets should be distributed and shared among a surviving spouse, biological children and stepchildren. They may also contain specific language spelling out how beneficiaries may or may not spend inherited assets.

Because there is a broad array of different types of trusts, families must seek the counsel of experienced advisors to ensure the structure they select meets their short- and long-term needs and goals. For example, the use of a qualified terminable interest property (QTIP) trust enables a grantor to provide lifetime income to a surviving spouse while preserving underlying trust assets for the benefit of his or her children. Another option is to fund an irrevocable life insurance trust (ILIT), which purchases a life insurance policy and becomes both the policy holder and beneficiary, which, in turn, allows death benefits to pass into the trust free of both federal estate and income taxes.

Estate planning for blending families is a complex endeavor that should be conducted with the guidance of experienced financial advisors who can help develop a plan that addresses the unique tax, financial and emotional implications of one’s decisions.

About the Author: Kathleen Marteney, CRPC®, is a financial planner with Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs, and a registered representative with Raymond James Financial Services. She can be reached at (800) 737-8804 or via email at info@provwealth.com.

Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.

Kathleen Montgomery is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC.

Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors + CPAs. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the advisors of PWA and not necessarily those of Raymond James. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

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Posted on September 29, 2021