Planning for Blended and Nontraditional Families

Blended Families

While a will leaving everything to one’s spouse may be sufficient for a traditional family, in families where there are children from a prior marriage, more creative planning is often necessary. Leaving everything to your spouse without ensuring that your children are provided for in your spouse’s estate could have unintended consequences. Suppose a man has three children from a prior marriage and dies leaving everything to his current wife. There are many scenarios that can affect his children’s inheritance:

family-hikeIf his wife dies without a will, his children inherit nothing from the wife under the laws of intestacy.
If the wife remarries and dies before her new husband, the husband will have a right of election against one-third of her assets.

The wife may simply decide to leave all her assets to her own children or other party, leaving your children with nothing.

Through proper planning, you can avoid these pitfalls and ensure that both your spouse and your children are taken care of when you’re no longer around.

Same-Sex Couples and Other Unmarried Couples

Same sex couples, as well as heterosexual unmarried partners, face unique challenges in ensuring that their loved ones are taken care of if something happens to them. Under the laws of Pennsylvania, a domestic partner has no rights to anything upon the other partner’s death, creating a potentially disastrous situation.

Even if you’ve been with your partner for decades, without a will, your assets may be distributed to estranged and distant family members or, in the absence of living relatives, your assets will be transferred to the state. The person who has been by your side all those years can be left destitute.

To make things even more difficult for unmarried couples, your partner may not be entitled to the estate or inheritance tax exemption that applies to property left to spouses. So even with an effective will, if you live in Pennsylvania, all property left to your partner will be subject to a 15% inheritance tax.

At the federal level, a 45% tax will apply to all property in excess of the estate tax exemption amount ($5.25 million in 2013). Certain planning techniques can alleviate the unfair tax burden that falls on the surviving partner.