Are you considering remarriage? Do you and/or your spouse have children from a previous marriage? If so, remarriage and a blended family are excellent reasons for a new or updated estate plan. Blended families are quickly becoming the "norm" here in San Diego and across the U.S. What do you need to know about remarriage from an estate planning point of view? Do you own your own business? What is "succession planning" and how do you protect the interests of your company?

One of the questions our clients often ask from an estate planning point of view is, “How can I ensure provision for my own children (from a previous marriage)?” What do you intend to leave to your children if you unexpectedly pass away? How will you ensure that part of the "separate property" you currently possess and the assets you will develop with your new spouse are properly set aside to provide for your existing children and heirs? Your spouse-to-be should be considering the same issues.

The Nightmare Scenario in Remarriage and a Blended Family

The nightmare inheritance scenario of remarriage and a blended family goes something like this:

After one spouse passes, the surviving spouse decides to focus on their own needs, as well as the children of the new marriage and the child(ren) they brought into that marriage. Without essential estate planning and business succession planning, the surviving spouse is free to move your “separate” assets, commingled assets, or joint community property into position for their own use.

In this scenario, nothing is left for the children from your first marriage, and assets such as collections, family heirlooms, and even businesses, investments, and retirement accounts are used for other purposes instead of providing for the intended heirs and beneficiaries.

How Does a New or Updated Estate Plan Protect Each Party in a Blended Family?

A new or updated estate plan is an excellent option when considering remarriage and a blended family, especially here in California. This will probably require a few separate trusts to provide for and protect intended heirs and beneficiaries.

The “grantor(s)” of a trust (generally speaking, the party who establishes the trust) may set aside specific items, assets, and funds for the existing child(ren) while providing for the needs of a new spouse and any children that may come from the new marriage.

A properly structured estate plan would set aside those specific assets you designate, including your separate property and a percentage of any community property upon your passing. For example, these assets could be placed in an irrevocable trust to make certain that they are passed on to the beneficiaries and heirs you wish to protect. The balance of your assets and community property would remain in a revocable trust that ensures they pass quickly and efficiently to your new spouse while minimizing complications, disputes, and taxes.

A Succession Plan to Protect the Interests of Your Company

What is succession planning? Succession planning ensures that your business is positioned to continue to exist and prosper in the event you become incapacitated, face an unexpected severe illness, or pass away. A well-crafted succession plan is essential for any business owner, especially in the context of a remarriage and a blended family.

This essential business tool clearly establishes not only the ownership and management of the company but how the business is to continue operations if a “triggering event” (such as illness, divorce, or death) occurs. How will you balance the needs of your business, your new spouse, any children from a previous marriage, and the children you may share with your new spouse? How do you intend for these (legally and financially competing) interests to be balanced if something unexpected occurs?

A well-crafted succession plan ensures that the business will transition smoothly per your wishes while helping to prevent inter-family disputes and even the potential of a forced liquidation to resolve associated liquidation.

While we are sure you and your new spouse both have the best intentions, the process of these conversations and the establishment of a new or updated estate plan can strengthen a new marriage. It is important to be able to openly discuss important issues such as providing for your children and protecting assets, including a closely held business or professional practice, in the event of an unexpected passing.