A non-financial legacy can include your family’s stories, recipes, or cultural traditions. Sharing these with future generations can foster a sense of belonging and continuity.
Another essential component of a legacy plan is ensuring that individual documents such as RRSPs, insurance, and workplace pensions reflect your new familial status. This is especially important for blended families.
Review Your Will
Inheritance tax laws constantly change, so reviewing your estate plan regularly is a good idea. This way, you can ensure your estate plan is up-to-date and suits your current situation.
Also, you should review your beneficiaries’ designations on your life insurance policies and retirement accounts. This is particularly important for people in blended families, where there may be children from a previous relationship who could be disinherited unless they are named in your Will or other beneficiary designations. Consult an experienced estate planning for blended families second marriage if you need help with what to do. They can guide you through creating a robust, well-thought-out legacy plan that reflects your wishes and circumstances. You can then feel confident that your estate will be managed and distributed as you wish.
Finally, if you have children from a previous relationship, consider using trusts and other techniques to ensure they receive their inheritance. These strategies can help you avoid potential family conflicts and provide tax benefits for your heirs.
Update Your Estate Plan
It’s important to regularly review and update your estate plan after major life events. These include marriages, divorces, deaths of family members or beneficiaries, births of children and grandchildren, and significant changes in your financial situation.
For example, a new child may add to the value of your estate, or you may decide to sell some assets and add others. This type of change can make it necessary to change how you want your property divided among your beneficiaries.
Also, you may need to change the beneficiary designations on some assets like life insurance policies, retirement accounts, and bank accounts. These designations determine how these assets will be distributed upon your death, so ensuring they match your current goals is important.
It’s also good to set up trusts for children from previous relationships, marriages, or stepchildren in your second spouse’s family. It can help ensure that these children are protected and provided for, even after your death. Our team of estate planning professionals can help you create a trust that best suits your needs.
Review Your Beneficiary Designations
Beneficiary designations on retirement accounts, life insurance policies, and other assets can significantly impact how your estate is distributed. It is important to review these regularly to ensure that they reflect your wishes. This is especially true for blended families, where you may have stepchildren or children from previous relationships.
In addition to ensuring that your estate goes to the people you want it to, beneficiary reviews can also help avoid unnecessary expenses and delays by avoiding the need for probate. Making beneficiary reviews part of your annual financial planning process and setting reminders is generally a good idea.
In addition to traditional beneficiaries, many blended families consider using trusts to distribute their estate. These types of trusts provide flexibility in balancing the interests of new spouses and children from prior marriages. For example, a trust can allow the surviving spouse to receive income for their lifetime and then equally distribute the remaining assets from a previous marriage to children. Working with an experienced estate planner is important to determine the best approach for your unique situation.
Update Your Health Care Directive
When a person dies, their family must deal with their estate and ensure that children or relatives are cared for. While estate planning is important for everyone, it can be especially complicated for people in blended families.
For example, someone with children from a previous marriage and a child with their current spouse may want to set up special needs trusts (SNT). These are irrevocable living trusts tied to life insurance policies that restrict beneficiary access and use the proceeds to fund a beneficiary’s special needs.
Healthcare directives can also be crucial for blended families in second marriages. These documents allow you to state your medical wishes in the event of an illness or accident. Discussing these with your family members, friends, and healthcare proxy is important so they know what you want.
While it is never easy to think about, estate planning can help you protect your loved ones and provide peace of mind for the future. The next step is to update your individual and collective documents and review your RRSPs, life insurance, and workplace pension beneficiaries.
Update Your Power of Attorney
Remarrying clients should have full disclosure of their assets with one another, as well as overall estate planning goals and plans for protecting their wealth from the cost of long-term care. They should also be transparent with their professional advisers and family members about the reasoning behind their decisions.
For example, many remarrying couples have children from previous relationships whom they do not want to disinherit. One way to accomplish this is to use a special needs trust (SNT). These trusts, often revocable living trusts tied to life insurance policies, restrict beneficiary access to funds and can only be revoked by the owner’s spouse upon death.
Another common issue arises when a second spouse has different levels of wealth than the current owner spouse’s natural children. Many estate planning techniques can address this issue, such as using a QTIP trust to provide a lifetime income for a surviving spouse and ensure that the children ultimately receive their inheritance.
