Given the current trends, the odds suggest that every estate planner will end up working with a large number of blended families.
Half of all first marriages end in divorce, and 75 percent of those divorcees end up remarrying. Among those second marriages, 65 percent will include children from prior marriages, according to research conducted the National Stepfamily Resource Center.
So blended families have become a basic fact of American life. Most estate plans assume a simple, linear movement from generation to generation, but the reality is more complicated.
Here are some strategies every financial advisor needs to know when dealing with blended families:
A blended family usually begins with a divorce. Given the fact that spouses own a great deal of property jointly and are automatically considered the beneficiaries of most wills, accounts and insurance policies, disinheritance ought to be a first step for anyone considering remarriage.
Joint ownership is such a common fact of modern life that divorced people should be very careful about reviewing all the ownerships they might need to disentangle. Following a divorce, an individual should in most cases begin the disinheritance process as soon as possible. This includes not just real estate, but cars and other vehicles, and anything else that might have a title to it.
A divorce and remarriage should cause anyone with extensive financial holdings to review all of his or her beneficiary designations. A divorced couple will want to review all accounts and policies to make sure the former spouse is no longer named as the beneficiary.
The documents reviewed should include life insurance policies, bank accounts, brokerage accounts, IRAs, and 401(k)s. Make sure your clients are aware that some divorce agreements prohibit some changes to these accounts.
One important factor to keep in mind: Beneficiary designations will override a will if the designations aren’t consistent. It’s not enough to rewrite a will and think that it will take care of all of the client’s revised wishes. Disposing of Special Property