Estate planning considerations for blended families

When two people with children from previous relationships get married, they form a blended family. While this can create a unique and loving situation, it raises some complicated estate planning considerations. 

Most of us want to ensure our children and stepchildren are taken care of financially should something happen to us.  However, many are unaware of the ways children can be unintentionally disinherited. 

In this article, we will provide some estate planning considerations for blended families. We’ll discuss how to ensure that your stepchildren are included in your estate plan and how to make sure that your biological children are never left out. 

What are the inheritance rights of stepchildren? 

In most states, stepchildren do not have automatic inheritance rights unless they’ve been adopted by their stepparent. This means that if you die without a will or other estate planning documents in place, your stepchildren would not inherit anything from you. 

If you want them to be able to inherit from you, you need to include them in your estate plan. You cannot simply say, “I leave my assets to my children,” in your will, as this may not legally include your stepchildren. You must explicitly name your stepchildren as beneficiaries to ensure they are included. 

Another thing to consider is whether or not your stepchildren are entitled to a share of your pension or other retirement benefits because these assets are typically left to designated beneficiaries outside of a will or trust. Designating “your children” as beneficiaries may not legally include your stepchildren and therefore, specifically naming your stepchildren as beneficiaries ensures that they are included. With that said, your ability to designate beneficiaries will vary depending on the rules of the particular retirement plan, so it’s essential to check with your plan administrator to find out how to properly plan for the disposition of retirement benefits. 

How children of divorce are unintentionally disinherited

In some cases, biological children may be unintentionally disinherited if their parents divorce and remarry. For example, let’s say John and Linda Doe have a child, Steve. John and Linda both divorce and each re-marry. If John Doe dies and leaves everything to his new spouse in his estate plan, his biological son Steve will not automatically be entitled to inherit anything from the new spouse unless she explicitly includes Steve in her estate plan. 

This is one of the most common ways children are unintentionally disinherited. 

Since Steve would be the stepson, he would not receive anything from his Dad’s estate, nor his stepmother’s estate when she passes, unless she thought to include him as a beneficiary in an estate plan. 

Inheritance tax considerations

Another consideration is that several states tax inheritance - meaning your heirs will have to pay taxes on the value of assets they receive from your estate. Some states with inheritance taxes employ different tax rates depending on the relationship between the deceased person and their heir. Unfortunately, this means stepchildren may be taxed at a higher rate than one’s biological children. In Kentucky, for example, children are exempt from paying inheritance taxes, while stepchildren may have to pay 6-16% in taxes based on the value of their inheritance. To determine whether your children or stepchildren will be subject to inheritance taxes, you will need to review the laws of the state where your children live, which may be different than where you reside. 

Protecting your children through estate planning

No matter what your family dynamic is, it’s important to take into account how your estate plan will affect your children. If you have stepchildren or children from a previous marriage, make sure to consider their rights and needs when creating or updating your estate plan. With careful planning, you can ensure that your children are taken care of regardless of what happens to you. To learn more about creating a plan that will protect your family and your assets, contact our office. 

The information contained in this article is provided for general informational purposes only, and should not be construed as legal advice on any subject matter. You should not act upon any such information without first seeking qualified professional counsel on your specific matter.