We Are Family – The Family of Former Pirates Great Learns About the Perils of Estate Planning for Blended Families
One of my favorite baseball players growing up was Willie Stargell. Pops, as he was known, was part of the 1979 world champion “We Are Family” Pittsburgh Pirates. A story this week about Stargell caught my attention and made me want to write this week about planning for blended families. The late Stargell’s second wife and widow has decided to auction off some of his possessions, drawing the ire of his children and first wife. You can read their open letter on facebook here. While I don’t know what Stargell’s estate planning said or what he would have wanted, it is always unfortunate to see the hostility that can arise in blended family situations.In a first marriage, most, if not all of the assets are held jointly and the couple often has the same estate planning goals. But planning for a blended family is different. There may be his children, her children and sometimes their children. The spouses often have separate assets they brought into the marriage. While they often want to care for the surviving spouse while he or she is alive, they generally want their assets to go to their own children after they die. Relying on estate planning methods used in a first marriage can undermine planning objectives. For example, wife adds her new husband on the title of her home and they own it as joint tenants with right of survivorship. If she dies first, her husband will have complete ownership of the home. This arrangement will take precedence over anything in a will or trust. Similar problems exist with beneficiary designations on life insurance, IRAs or other tax-deferred retirement plans.What are some things you should consider if you are part of a blended family?
A pre- or post-nuptial agreement. Absent this agreement whatever planning you do is subject to future statutory claims by the surviving spouse.
Consider establishing a trust that provides for the surviving spouse during his/her life, but locks in your beneficiaries upon your death. This type of planning can also provide protection in the event your surviving spouse remarries.
Name your trust as the beneficiary for life insurance policies and tax-deferred retirement plans. The surviving spouse can receive lifetime income, yet the owner-spouse can keep control (through the trust) over the rest of the proceeds.
Plan for long-term care. If one spouse requires nursing home care before Medicaid assistance will be available, both spouses' assets will need to be spent down as required by law.
If you and your spouse are part of a blended family, the need for well thought out estate planning is vital. If you would like to learn more about estate planning for blended families please contact our office for a consultation.