With divorce more and more common, many people find themselves in blended families—those in which there are children from a previous relationship. And as a result, they face additional challenges when making their estate plan.
Most people have at least two priorities when planning their estate:
- Provide for their spouse
- Leave an inheritance for their children
Achieving both of these priorities in a blended family often requires careful planning. One of the big risks—for any couple—with relying on a will and joint tenancy accounts as the foundation for an estate plan is accidental disinheritance. And this risk is magnified in blended families.
Accidental Disinheritance in a Traditional Family
The classic estate plan for a married couple used to be joint tenancy accounts and wills that leave everything to the spouse.
Let’s imagine you pass away and your spouse inherits everything. What do you think might happen if your spouse remarries?
- Will your spouse be able to keep your marital assets separate? Or will it begin to mix over time with the assets of his or her new partner?
- Will your spouse create a new estate plan that leaves some or all of your marital assets to his or her new partner?
Accidental disinheritance happens when any of your marital assets passes to your spouse’s new partner when your spouse passes away. Money or property that was intended for your children will now probably never reach them.
How could it happen in practice?
Steve and Cindy have been married for 12 years, when Steve suddenly dies in a car accident. Cindy doesn’t have to worry about money because Steve left behind a solid retirement account and significant life insurance policy. Even so, Cindy goes back to work so she doesn’t have to live off her savings entirely.
Four years later, Cindy meets Mark at a company picnic. After dating for a few years, Mark pops the question!
Early in their marriage, Cindy does her best to keep her money separate from Mark. But as 5 years turns into 10, and then 15, money starts to get mixed together.
Cindy adds Mark to her checking and investment accounts—for “convenience”. She also prepares an updated estate plan that names Mark as the primary beneficiary of her will. After all, her kids are grown and don’t need her money as much as Mark does if something were to happen to her.
The net result is that Cindy’s kids—Steve’s kids—are left out in the cold if Cindy passes away before Mark.
Accidental Disinheritance in a Blended Family
While accidental disinheritance usually waits until the second spouse dies in a first marriage, it can easily happen when the first spouse dies in a second marriage.
If you have children from a previous marriage, who will receive your assets when you die? Are you comfortable knowing that any assets you leave to your spouse may never reach those children if you die first?
The optimist in you might say, “I trust my spouse to do the right thing.” But trust that is repaid doesn’t solve every problem that might come your family’s way.
A mismatched estate plan can result in accidental disinheritance even with the best of intentions. A typical estate plan names a person’s spouse first and “descendants” second. But children from a deceased spouse’s previous relationship aren’t “descendants”. So unless the children are named specifically in the survivor’s estate plan or other arrangements are made, they would effectively be disinherited.
Avoiding Accidental Disinheritance
A successful estate plan will that take into account all aspects of your personal, family, and financial situation. Whenever there are children from a previous marriage, the estate plan needs to address it. Or at least there should be an understanding of how the plan handles each potential disinheritance situation.
