Estate Planning and the Blended Family in Texas
Blended families have become increasingly common and they also present unique challenges when it comes to estate planning. Blended families are defined as families where at least one spouse has children from a prior relationship. These families require careful planning to ensure that family members are provided for as intended in the event of the death of one or both spouses. A few important estate planning issues that you should consider if you are in a blended family are discussed below.
One of the first things to be aware of are the laws of intestacy in Texas. Intestacy refers to the legal process of distributing a person’s property when they die without a will. The distribution scheme in Texas intestacy law is fairly complex, and often depends on the character of property, such as whether the property is separate property or community property. Generally speaking, community property consists of property acquired during a marriage, except through inheritance or gift. Separate property is generally considered property acquired before marriage, or during marriage through inheritance or gift. Another important factor in the inheritance scheme in Texas is the existence of children of the deceased, and whether or not all of such children are also children of the surviving spouse. In Texas, if a person dies without a will and has children from a prior relationship, their community property will be split between their current spouse and all of their children, from both the current and the prior relationship. The separate property distribution scheme is even more complex.
If any of their children predecease them, then that deceased child’s share is split among any grandchildren. This can lead to complications and disputes between family members, and it may not be the most equitable distribution of assets. Time consuming and costly guardianship proceedings may result. And certainly this manner of distribution will not likely match the intent of person that passes.
To avoid this situation, it is crucial for blended families to have a comprehensive estate plan in place. This includes a last will and testament that clearly outlines how the assets will be distributed after the death of one or both spouses. In the will, it is important to designate specific beneficiaries, and to make sure that alternate beneficiaries are also named. Wills can provide for either the blanket transfer of assets, or may provide for specific assets being transferred to specific beneficiaries, or both. This can include real property, accounts with financial institutions, investments, collections, furnishings, company ownership and other assets. Most wills contain contingent trust provisions that simplify the holding of assets for young or incapacitated beneficiaries, and hold such assets in trust for the benefit of these beneficiaries.
Another option for blended families is to set up a living trust. A living trust is a legal entity created during your lifetime, that can hold assets and distribute them according to specific instructions. This can be particularly useful for blended families because it allows the spouses to provide for their children from prior relationships while also providing for their current spouse. A trust can be set up in a variety of ways, and it can be tailored to meet the specific needs of the family. Trusts are not the right choice for everyone, because they have certain advantages and certain disadvantages that should be discussed with experienced estate planning counsel.
Another important consideration for blended families is the designation of beneficiaries for life insurance policies, financial accounts and retirement accounts. These assets do not have to pass through a will, or through the intestacy laws, so it is important to make sure that the beneficiaries for these types of financial assets are updated and accurate. This can help ensure that these assets go directly to the intended recipients, bypass the probate process, and prevent disputes between family members.
It is also important for blended families to consider the potential for disputes or disagreements between family members after the death of one or both spouses. This can be particularly challenging when there are children from prior relationships involved. To avoid these disputes, it is important plan ahead and engage in the estate planning process while you can. This can be done by seeking the advice of an experienced estate planning attorney.
Finally, it is important for blended families to regularly review and update their estate plan. Life circumstances can change quickly, and an estate plan that was effective at one point may no longer be appropriate. It is important to review the plan on a regular basis and make updates as necessary to ensure that everyone is provided for and that the distribution of assets is in accordance with the wishes of the spouses.
Estate planning for blended families in Texas requires careful consideration and planning. A comprehensive estate plan that includes a will, possibly a trust, and updated beneficiary designations can help ensure that everyone is provided for and that disputes are avoided. By being transparent and seeking the advice of an experienced estate planning attorney, blended families can create an effective plan that meets their specific needs and provides for their loved ones.
Nick Caridas, Attorney with CaridasLaw.com
Photo by Kevin Delvecchio