In the world of estate planning, we attorneys generally consider a married couple with children as a traditional couple. Anyone in any other relationship than that is considered to be Non-Traditional. The two most common category of clients that are considered to be in a Non-Traditional Relationship are unmarried couples (regardless of whether they have children) and those in a Blended Family.
What is a Blended Family?
A Blended Family is generally any family in which you have a married couple and least one of the partners has a child from a previous relationship.
Who Else is Considered to Be in a Non-Traditional Relationship?
When most estate planning attorneys use the term Non-Traditional Relationship, we are generally referring to unmarried couples, but it can also include anyone with multiple spouses. (Historically, the term ‘Non-Traditional Relationship’ was used for anyone other than a marriage between a husband and a wife. However, since same-sex marriage has become legal in the United States, we no longer define it this way as there is little difference when planning for married couples, regardless of gender.)
Personally, I have noticed that married couples without children often require the same specialized estate planning as most unmarried couples.
Why Do Blended Families and People in a Non-Traditional Relationship Require Special Estate Planning?
The typical estate plan for a traditional couple with children consists of each spouse leaving money to the surviving spouse. On the death of the surviving spouse, everything is left to the children. The surviving spouse is usually the executor and trustee of any trusts. Occasionally we will set up a trust for a spouse or child for tax planning or asset protection purposes. If a traditional couple does not create a Will, the state’s intestacy scheme will send the money in the same direction – but without any trust planning or tax planning.
Clients in a Blended Family and in other Non-Traditional Relationships often have competing goals of providing for children from a previous relationship, a spouse, and other loved ones. They might want a certain dollar amount or percentage to go to their children or other loved ones, and the rest to a surviving life partner. They also may want whatever goes to their life partner to be in trust, so that the remainder can go back to their children or other family members upon the death of the life partner.
Accordingly, Wills and Trusts must be carefully and custom designed to ensure that a client’s assets will go where they want them to go, in the amounts that they want, and in a tax efficient manner. Moreover, attorneys need to work closely with the client and financial advisors to revise beneficiary designations on retirement accounts and life insurance policies. Repurposing or obtaining life insurance is often a simple way to achieve desired outcomes when preparing an estate plan.
We also work with clients to retitle assets (such as bank accounts and deeds to property) to ensure that the beneficiaries are not accidentally cut out. To understand why title of assets is so important in Non-Traditional Relationships, please read this post: https://willstrustsestates.blogspot.com/2017/01/why-titling-of-assets-is-so-important.html
Another area that requires thought is with respect to who will be in charge of an estate, trust, or on your medical power of attorney. When two or more unrelated parties are competing for an inheritance, or to be in charge of your health care decisions, conflicts can arise. An neutral third party may need to be appointed or a system to break ties may need to be created so that all your loved ones can be involved, but in a meaningful and productive way.
Why Retirement Assets Require Custom Planning
Retirement Assets, such as an Individual Retirement Account (IRA), 401(k), and a 403(b), often require special beneficiary designations or trusts. First, you want to make sure that the money goes where you want it to go immediately upon your death. Second, depending upon the amount involved, you may also want to control where that money goes after the death of a spouse or loved one.
Imagine a situation where the bulk of your wealth is in an IRA, but you want to provide for a spouse plus a child from a previous relationship. Let’s also imagine that you want to give the child 50% of the IRA and your spouse 50% of the IRA. You could simply name them as 50/50 beneficiaries. However, this means that upon the death of your spouse, that the 50% where spouse was named as a beneficiary would likely gone forever as he or she could do whatever they want with it. A way to solve this problem is to designate a trust for your surviving spouse as the beneficiary of 50% of the IRA, so that upon the surviving spouse’s death, whatever is left over can still go to your child.
How Clients in a Blended Family and other Non-Traditional Relationship Can Get Their Estate Planning Started
For unmarried couples, individuals in a blended family, and others in a Non-Traditional Relationship, planning is often a sore point. Because of the competing goals at play, some find it difficult to have a conversation about what they really want or need.
Ignoring the issue not only leads to estate litigation, but a more expensive estate administration process and higher taxes. If you are in a non-traditional relationship, I strongly recommend seeing an experienced estate planning attorney in a jurisdiction near you to flush out all the issues that affect you. We can often suggest solutions that may not have occurred to you so that you can provide for everyone in your life in a clear way that is designed to minimize conflict.