Blended families—that is, a family where at least one spouse has prior children—face a myriad of unique estate planning challenges. The exact configurations and the interpersonal dynamics will be different in each case, meaning no blended family is the same as another. And, given that 50% of marriages end in divorce, and 60% of re-marriages end in divorce, these challenges should not be taken lightly.
Because of the uniqueness of these scenarios and the number of moving parts, “fill-in-the-blank” forms or freely downloadable templates are woefully insufficient to provide a comprehensive and secure estate plan. Each blended family’s needs must be addressed on a case-by-case basis.
I like to think of a golf course. Estate planning for a “traditional” family is like playing a par 3 with a full set of clubs: All the tools are in the bag, and you just need to know which one to use in which situation. A blended family, though, is like a par 6, with a 10-foot-wide fairway, 10-inch deep rough, and Sarlacc pits instead of sand traps—the traditional set of tools just aren’t going to work.
And yet, many blended families still opt for more “traditional” estate planning strategies despite the risks in doing so. Primarily, I think, it’s because people want to assume that everyone involved has the best intentions and will always “do the right thing.” But, as I have seen countless times, people often ignore their better angels, especially when money is involved.
Even though each family will be different, there are a number of common pitfalls that can wreak havoc on a blended family’s estate plan. Luckily, there are also ways to avoid these pitfalls!
What Is a Blended Family?
A blended family is best defined as a current family unit that is a combination of previous family units—in other words, relationships where one or both of the partners are single parents.
Pro Tip: “Blended” doesn’t only refer to your marital history: It would also apply to your son or daughter, your grandkids, or even your parents. Regardless of which generation is “blended,” the larger family structure will be impacted, and the same factors and concerns are in play.
Blended families are quite common now. In fact, there are a number of television shows that center around blended families. The most iconic is probably “The Brady Bunch,” but one of my personal favorites is “Modern Family.”
In the show, the paterfamilias Jay Pritchett (played by Ed O’Neill) has two adult children, Claire, who has three children of her own, and Mitchell, who has two adopted children. Claire’s eldest daughter eventually has twins as well.
At age 60 Jay married Gloria (played by Sophia Vergara), who is a year younger than Jay’s daughter Claire. Gloria has a 10-year-old son, and Jay and Gloria have a child of their own. In all, Jay has three biological kids with two different women, a stepson, five grandchildren, and two great-grandchildren.
This complicated familial structure makes a great backdrop for a sitcom, but in the real world it can lead to very un-funny situations, especially around estates and inheritance.
For example, will Jay leave his entire estate to Gloria outright, trusting that she won’t favor her two sons over Jay’s two children (or even disinherit them altogether)? We like to hope that Gloria would “do the right thing,” but there’s no guarantee.
Maybe Gloria never really liked Jay’s children, so she decides to leave everything to her two sons. In that case, Jay’s biological children, grandchildren, and great-grandchildren would receive none of the plentiful estate Jay had built as a small business owner.
Or perhaps it’s less malicious. Given the age difference, Gloria could easily live for 30–40 years after Jay’s death. As time goes by, she gets remarried and slowly loses touch with Jay’s kids and their families. Then, when she updates her estate plan, she simply leaves out Jay’s kids, whom she hasn’t seen or spoken to in years. The disinheritance wasn’t spiteful or pre-planned, it just happened.
Pro Tip: Due to various factors, including the non-uniformity of estate planning statutes and the relatively new and evolving legal landscape of same-sex marriages, LGBTQ couples face an array of additional estate planning hurdles. These challenges only become more difficult when dealing with a blended LGBTQ family.
It’s an interesting mental exercise to think about what these hypothetical families would have done, but let’s look at a couple of real-life examples of how a blended family’s estate plan can go awry.
Pitfall #1: Reciprocal Wills
When asked, most spouses will say that their basic estate planning goal is to provide for their surviving spouse and children. A common method of accomplishing this goal is through reciprocal wills.
Reciprocal wills are a strategy where, when one spouse passes away, the surviving spouse receives all of their assets and property. Then, when the second spouse passes away, the remaining estate passes equally to their children or heirs.
For example, when Tim dies, his wife Tammy receives all of his personal assets and becomes the sole owner of any assets owned jointly or as tenants by the entirety (e.g. their home).
Then, when Tammy passes away, their three children receive equal shares of the remaining assets (e.g. one-third ownership of the home).
This strategy works well when all children involved are the biological offspring of the two spouses. But, when dealing with a blended family, serious complications can arise. Most importantly, the deceased spouse has no guarantee that the surviving spouse will abide by the terms of the reciprocal will or provide for deceased spouse’s children.
Let’s slightly modify Tim and Tammy’s scenario and say that Tim had a 15-year-old daughter from a prior marriage. He and Tammy have reciprocal wills, so when Tim dies 15 years later all of his assets pass to Tammy, with the understanding that, when Tammy dies, the estate will be split evenly between their three biological kids and Tim’s first daughter.
Unfortunately, throughout her 20s Tim’s daughter had been slowly losing touch with Tammy. When Tim passes away, she is 30, married, and has her own child. Some years later, when Tammy revises her estate planning documents, she leaves everything to her three biological kids and Tim’s first daughter gets nothing.
There are other ways in which the surviving spouse can effectively disinherit the deceased spouse’s children that don’t involve an outright re-writing of the will. In other words, the surviving spouse can technically abide by the letter of the will, but disregard its spirit. The surviving spouse can:
- Make yearly tax-free gifts to their children (as of 2022, up to $16,000 to each child),
- Change beneficiary designations on insurance policies and retirement accounts, which transfer by operation of law (i.e. the designations override the will), or
- Retitle assets jointly with right of survivorship with their own children or even a new spouse (assets titled thusly also pass by operation of law).
Such tactics can be especially devastating for special needs children, who may need help paying for specific medical conditions or long-term care.
Pro Tip: “What about Fl. Stat. 732.701?” you might ask. Yes, this statute does allow Florida residents to contractually obligate the other spouse to abide by the terms of a reciprocal will. However, these agreements are easy fodder for estate litigation and the surviving spouse can easily circumvent the contractual provisions by the means just mentioned (e.g. gifts, retitling, changing beneficiaries). Worst still, they could simply breach the contract, and your children would have to sue to enforce the original agreement.
Pitfall #2: Inconsistent Asset Titling
The way that you title your assets (i.e. who or what legally owns the asset) is a critical part of an estate plan.
Spouses often will own property, bank accounts, and other assets jointly or as tenants by the entirety (TBE). This can be a good estate planning strategy insofar as assets titled thusly automatically become the property of the surviving spouse without going through probate.
When dealing with a blended family, however, the spouses may have different wishes for the disposition of their assets. The problem is twofold.
First, as we covered above, once the surviving spouse owns the asset outright, they have sole discretion over what happens to that asset. They can choose to follow the original plan and transfer it to your children, or not.
Second, assets owned jointly or as tenants by the entirety pass by operation of law, that is outside of the will. What people often fail to understand is that, precisely because these assets pass outside of the will, your will cannot overrule the titling of the asset.
In other words, let’s say that Tim and Tammy (from above) own a vacation home as tenants by the entirety, but it’s a house that has been in Tim’s family for generations. Tim worries about his first daughter being left out of his estate, so he includes a provision in his will that she should inherit this house when he passes away. Unfortunately, the because the home is owned as TBE, Tammy becomes the sole owner and Tim’s will is irrelevant.
The same holds for assets with beneficiary designations such as life insurance policies, 401(k)s, IRAs, and other retirement accounts. Because they pass by operation of law, you cannot count on your will to direct how and to whom they should pass.
Pro Tip: Do note that some retirement accounts require you to get spousal consent to name someone else as beneficiary. Plus, non-spouse beneficiaries have fewer options for what to do with these accounts than a surviving spouse does. Before making any major changes in this sphere, you should talk to a trusted advisor.
Pitfall #3: Not Legally Married
You might think that this is a fairly uncommon issue, but you’d be wrong. The Pew Research Center reported that in 2015 roughly 7% of children were living with cohabitating parents (i.e. not legally married). Additional studies estimate that by age 16 nearly half (46%) of kids have experienced a cohabitation living arrangement.
There are a number of estate planning issues with long-term cohabitating partners who are not legally married. Above all, Florida does not recognize common law marriage for any unions after January 1, 1968. So, whether you’ve been living together for 10, 20, or 30 years, you will never enjoy the legal rights of married spouses in Florida.
Pro Tip: There is a loophole. If you enter into a common law marriage in one of the ten states (plus D.C.) that allow common law marriage and then relocate to Florida, you could still enjoy the same rights as a married couple in Florida.
Long-term cohabitation becomes even more problematic when dealing with blended families because, unless specified in the relevant estate planning documents, the unmarried partner will not be entitled to any share of the deceased partner’s estate.
For example, let’s say Tammy (from above) had two sons from a previous marriage that ended in a particularly contentious divorce, and because of this experience she and Tim never officially got married, even after 25 years of living together. Were Tammy to pass away suddenly, without the proper estate planning documents in place, the estate would pass to her two sons, and Tim would not be entitled to a portion.
Pro Tip: An unmarried partner also loses other rights such as the ability to bring a wrongful death claim on behalf of the deceased partner. A woman in this exact situation contacted my son’s firm. Her long-term (but unmarried) partner died after severe slip and fall accident. Unfortunately, she was barred by Florida law from bringing a wrongful death lawsuit because she was not the legal spouse.
3 Estate Planning Strategies for Your Blended Family
So, how does a blended family avoid these estate planning pitfalls? I will go into these strategies in more depth in a future post, but for now, let’s look at a couple basic ones.
Pre- and Post-Nuptial Agreements
For blended families a pre-nuptial agreement could be a viable option, especially when one spouse comes into the marriage with significantly more assets. These agreements can limit the amount each spouse is required to leave the other at death, define how to divide assets in the event of a divorce or death, resolve issues around homestead rights, and more.
Pro Tip: Florida law grants a surviving spouse substantial rights to the other spouse’s estate, primarily the right to claim an “elective share,” if they did not receive the state-mandated minimum amount of assets. Per Fl. Stat. 732.702, these rights can be waived by a properly written and executed agreement.
It is best to discuss and draft any marital agreements before getting married, although post-nuptial agreements are also available. And if this process is approached with a positive attitude and a common goal, nuptial agreements can significantly reduce the stress and confusion of estate planning for blended families.
Qualified Terminable Interest Property (QTIP) Trusts
Qualified Terminable Interest Property Trusts (QTIPs) are great strategies for achieving the dual goal of providing for the surviving spouse and protecting the interests of the other beneficiaries.
In short, a QTIP trust grants the surviving spouse the right to periodic distributions of the interest earned on the trust assets, but they have no access to the principal. Upon the death of the second spouse, the trust assets generally distribute to the first spouse’s descendants.
Pro Tip: QTIP trusts have an additional benefit of deferring federal estate and gift taxes until the death of the second spouse.
Bloodline Trusts: Protecting Children and Grandchildren
Bloodline trusts tackle a separate issue: How to protect your children’s inheritance if they remarry. This is a perennial concern for parents, who want to ensure the money they leave their child stays with their child and doesn’t get purloined by a profligate ex-husband or ex-wife.
Once again, let’s turn to Tim and Tammy, who, in this scenario, were not previously married. However, their daughter Jane is married to Jim, who has two kids from two prior marriages and a slight gambling problem. Tim and Tammy want to provide for their daughter and her family, but they don’t want Jim (likely to be Jane’s primary beneficiary) to be able to squander the money.
This is where a Bloodline Trust comes in. The terms of the trust agreement can be fine-tuned, but will generally include provisions that:
- Your child is the sole trustee with rights to make distributions for themselves and their descendants,
- In the event of a lawsuit or divorce, that child is temporarily replaced as trustee by a successor trustee and reinstated upon termination of the lawsuit or divorce,
- Your child cannot terminate the trust (so-called “Spendthrift” provision), and
- Upon your child’s death, the trust terminates and its remaining assets are distributed to your grandchildren, not to your son- or daughter-in-law.
Unique Planning for Unique Families
Blended families are an increasingly common type of family structure, and the possible configurations are virtually endless. This complexity means there are more opportunities to make hazardous errors in your estate planning.
Most importantly, each configuration has unique estate planning challenges, which in turn require unique solutions.
I went through a few possible planning options above, which can be tweaked and fine-turned to meet your family’s needs. Your best course of action is to speak to an estate planning attorney with experience in creating comprehensive estate plans for blended families.