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Estate Planning For Blended Families

My husband’s mother and step-father were each in their third marriage when I met them. My mother- in-law had two children from her second marriage (my husband and his brother), and my father-in-law had two children from each of his first two marriages.

When my father-in-law passed away, his estate avoided probate because his assets were either held jointly with survivorship, or had a designated beneficiary. Namely, everything passed to his wife.

Except for a disagreement about whether he wanted a burial or cremation, the distribution of his estate went pretty smoothly.

Related: 5 ways to prepare your executor before you die

I went to see the lawyer with my mother-in-law when she revised her own will after her husband’s death. The estate would be equally distributed among the six children. However, a couple of years later, she secretly met with the lawyer to change her will, leaving her assets to her own two children.

I will just point out here that I was the executor of all the wills. I didn’t know of the change until I received a copy of the will in the mail.

I confronted her about it.

I don’t want to be executor. You’re putting me in a bad situation with this new will,” I told her.

I don’t care,” was her response.

After she passed away, I had a discussion with my husband, his brother and my sister-in-law. We agreed in the end to split the net proceeds of the family home (which my father-in-law had built prior to his first marriage and the children had grown up in) among all the children, outside the will. Fortunately, this was acceptable to all concerned.

Estate planning for Blended Families

Blended families are growing

The number of blended families – and step-children – is growing in Canada. According to the long-form census data from 2011, blended families (where one or both spouses have children from previous relationships) represent about one in eight of couples with children.

Most wills say that assets are all to be given to the spouse, and only on the death of both parents are the children to inherit. In a second (or more) marriage scenario, the will should be set up specifically to split the assets between the children and the spouse.

Protecting your children

It is vitally important that parents of blended families make out a will.

Related: Are DIY wills ever a good idea?

Estate planning becomes more complicated and steps must be taken to ensure that your intentions to protect the children from your prior marriage(s), as well as your new spouse, so that ultimately your estate will be distributed to the intended beneficiaries.

Without careful planning one serious consequence is the potential disinheritance of your children (as was the case in my husband’s family). You want to ensure that at least a portion of your estate passes to your children.

Never assume your kids are going to help each other financially after you pass away.

Special estate planning needs

How do you balance the needs of your current spouse with the protection of your children?

Be aware of survivorship and beneficiary designations.

If you and your current spouse own your home jointly with right of survivorship, for example, your spouse will own the property after you pass away. You can’t leave it to your children in your will.

Assets with a named beneficiary – RRSPs, life insurance policies – pass outside your estate. This named beneficiary gets the proceeds. You could name your spouse as beneficiary of one, and your children the other, for example.

You can protect beneficiaries by setting up trusts.

A spousal trust can be set up to provide income for life for your surviving spouse, or your spouse can have the use of the family home for the rest of his or her life. Then the remaining capital and/or property is passed on to the children.

A family trust can name your children as beneficiaries.

Final thoughts

Make a list of all your assets. Then list how each asset is held (singly, jointly) and which has a beneficiary designation. This list gives a clear picture of which assets are available to leave to your children, and you can cover the distribution in your will.

Related: So you’ve been asked to be an executor. Now what?

Take this list to an experienced estate planning lawyer to talk it through and he or she can produce a tailor-made solution that will distribute your assets in accordance with your wishes.

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2 Comments

  1. Shirley Sellers on November 11, 2016 at 10:25 am

    My Step Mother did the same thing. After my father’s death, she changed her will and disinherited myself and my brother and sisters. Joint tenancy of their real estate made it impossible to dispute my fathers will which left everything to his wife. The original real estate asset was my fathers.
    Here is a simple way to protect your children’s inheritance.
    – put real estate holdings in ‘Tenants in Common’ with each holding the percentage needed for their children.
    – give your spouse a ‘Life Estate’ in your share of the real estate. This means they can live in the house until their death or until they wish to sell the property.
    – if the surviving spouse sells the property the funds from the sale will be distributed as per the Tenants in Common distribution.

  2. Carol Nowlin on November 11, 2016 at 10:58 am

    My husband (with children from 3 previous marriages) and I (with children from one previous marriage) have been wrestling with this issue for a while. These situations are always complicated – eg most of my husband’s net worth was acquired during his 3rd marriage and he wants to respect his deceased wife’s request that the children of their marriage benefit from that. We believe the best solution in our case is some sort of spousal trust which would allow for an equitable – but not equal – distribution of our remaining estates to our respective children after we have both passed away. Now we have to stop procrastinating and find a lawyer to put our wishes into effect!

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