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Financial Considerations: Regarding Assets and Blended Families

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Financial Considerations

Regarding Assets and Blended Families

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Families come in different shapes, ages and forms. David, Abraham, Solomon and other notable people in the Bible had varying family dynamics. Jesus Christ himself was raised by His mother and stepfather, Joseph! Depending on a family’s nature, there may be a range of factors to consider when planning for the future and providing for dependents or beneficiaries. In a second marriage occurring later in life, spouses may bring assets they have accumulated individually, in addition to children from a previous marriage. This can present unique challenges when it comes to property ownership, inheritance and estate planning. 

Ownership and inheritance questions may come up between spouses, children or heirs. Typically, individuals in blended families want to provide for their new spouse as well as their children from the previous marriage. Some couples find prenuptial arrangements helpful. Making informed decisions now regarding finances and assets will impact inheritance options later on—especially for children and blood family members. 

Two important factors to consider are property ownership and inheritance. The clear lines of ownership and inheritance can get complicated over time. 

Property Ownership and Beneficiaries: There are two basic types of personal property in a marriage: sole (or separate) property and joint (or community) property. Sole property is acquired before the marriage—perhaps after a divorce or the death of one’s previous spouse. Joint property (or marital assets) is everything that either spouse earns or acquires during a marriage. One error that some people make is to combine sole property with joint property. Combining sole property converts it to joint property. An example is a widow inheriting a $1,000 account from her deceased husband. While the account remains titled in her name, it remains sole property. When she gets married, if she adds her new spouse to the account, it becomes joint property. Financial advisors will caution you not to assume that what belongs to one spouse belongs to the other. One core issue to consider after a second marriage is whether to keep the title or ownership of an asset in your own name (as sole property) or to have title in a joint name with a spouse. The ultimate answer may come from asking, “What happens if death occurs tomorrow, and who will be my heir”? 

Inheritance: When joining two families together, inheritance can become complicated. Consideration should be given not to unintentionally disinherit your own children. A classic fear may be giving sole property (such as the family’s inheritance or the deceased spouse’s IRA benefits) away to a non-bloodline relation in error. For instance, it is very common and often required to place your spouse on as your retirement plan beneficiary. If you inherited such an account when your spouse died you may feel obligated to leave that money to the children of that marriage. 

Careful consideration of beneficiaries is the solution. The use of will substitutes (such as life insurance and POD or TOD accounts) can provide specific beneficiary solutions. Sole and separate property can also be “Bequeathed” as part of a Last Will and Testament or in a Living or Revocable Trust. This is why it is important to decide what will remain sole property, and what will become joint property upon your marriage. 

Custom estate and trust planning techniques can also assist with the unique needs of blended families. The worst estate planning solution is to do nothing and let your State’s Intestacy Laws do all the planning for you. State Intestate laws have power over who inherits property if no Will exists. Our Planned Giving brochure covers many of the commonly used planned giving methods including Last Will and Testament, Will Substitutes, Qualified Charitable Distributions, Life Insurance as a Planned Gift and Trusts. If you have questions about combining assets or making decisions for beneficiaries after a second marriage, please contact Planned Giving Coordinator Howard Marchbanks at (513) 570-2343, or plannedgiving@ucg.org
 

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