As you look ahead and realize that you will be in hospice care for a while, it may be time to start getting things taken care of. Now, more than ever, it’s important to get your affairs in order, especially if you have a blended family. For many families, being blended creates a sense of belonging and harmony. For others, it may be a source of contention or strife. No matter which category your family falls into, blended families introduce some potential challenges you must consider when it comes to estate planning.
The Challenge
According to Pew Research Center, 42 percent of Americans are in a “step” relationship of some kind. This means divorce, remarriage, and widowhood are a part of many lives. But what’s the estate planning challenge here?
With estate planning, the challenge revolves around whether the correct people are listed on your important documents or not. In general, we are a bit lax about updating our accounts, files, or beneficiaries as often as we should. For instance, you might have taken out an accidental death & dismemberment insurance policy with your employer five years ago, but since then, you’ve divorced and remarried. Do you know which spouse is listed as a beneficiary on your policy? Is it the correct spouse?
A Few Questions to Ask Yourself
If you have a blended estate plan, it’s helpful to think through some important questions as you put your affairs in order.
- Does your will explicitly say how to handle your assets after your death?
- If you are unable to make decisions for yourself, who should serve as your proxy?
- If you have children, who should take over their care?
- Regarding your assets, do you need to strike a balance between a current spouse and a former spouse? Or children from one marriage versus a second?
- Does a former spouse have a fair claim to any portion of your assets?
- Do you need to make a distinction between what children from one marriage are to receive versus children from a second marriage?
5 Important Estate Planning Documents
Here are 5 estate planning documents to consider as you prepare a plan that will protect your family and make your wishes known.
1. Financial Power of Attorney
If you are feeling very unwell, you may be unable to take care of everything on your own, or you may just want to have someone else who can help out with the details. With a financial power of attorney, you grant an agent – often a spouse, adult child, or trusted friend – the ability to conduct financial transactions on your behalf. This means that the agent can access bank accounts, pay bills, obtain loans, and perform other financial acts on your behalf. If you previously signed a financial power of attorney and would now like to change your agent, speak to your estate planning attorney to update your records.
If you become incapacitated without a financial power of attorney and no one else has access to your accounts, it may be difficult for your loved ones to take care of your financial affairs. They will likely have to petition the courts for permission to conduct your affairs. For some, the process is arduous and inconvenient, so consider appointing a power of attorney.
2. Medical Power of Attorney
Similar to a financial power of attorney, the medical power of attorney grants your appointed agent the ability to make medical decisions on your behalf. Your agent’s powers will work in tandem with your living will (discussed below), if you have one. Also, make sure to sign a HIPAA release form. This document allows your appointed agent access to health, care, and treatment information.
A medical power of attorney allows you to appoint the best person to make decisions regarding your medical needs. By making your medical wishes known, you take the burden of decision making off your family. Any family can experience stress or strain when medical wishes are unclear. For blended families (especially those who don’t always see eye-to-eye), the medical power of attorney can help prevent disagreements and strain among family members.
3. Living Will
Whether you set up a medical power of attorney or not, it’s good practice to complete a living will, which is a document that clearly outlines what medical treatments you would and would not like to be used to keep you alive. This type of list provides peace of mind to family members, giving them confidence in any medical decisions they may need to make on your behalf.
Because the list is extensive, talk to your doctor and family members about your medical wishes. If you want to update your medical directives to include a new spouse, you can do so at any time. Just make sure that you dispose of all copies of the old directives.
4. Legal Will
Following a death, the legal will gives clarity to family members by providing instruction for the distribution of your assets. In general, a will is a simple document that identifies beneficiaries, names guardians for minor children, appoints an executor to the will and/or a property manager, and leaves instructions on how to pay for debts and taxes.
If you are part of a blended family, a will may become especially necessary in case a former spouse, estranged children, or even step-children try to make a claim. If there are certain individuals whom you’d like to prevent from gaining access to your assets, a legal will is the best way to prevent it. Plus, you can revise a will at any time so you can make changes when needed.
5. Revocable Living Trust
Though most people need a will, not everyone needs a living trust. Living trusts are a bit more complicated than wills. You transfer your property into the trust, naming yourself the trustee, and then adding a successor trustee to take over upon your death. The successor trustee then distributes your assets according to your wishes.
If you have a large number of assets, a living trust is very helpful. Plus, you avoid the necessity of probate court and can keep everything private. Like a legal will, a living trust can be revised at any time.
One more note: a living trust does not take the place of a will. You must have a will to appoint guardians for minor children, designate an executor, and assign a property manager (if property must be maintained until a minor child comes of age).
Now that you are aware of some estate planning challenges, start talking with the people closest to you. Make an appointment with an estate planning attorney. Take time to set things in place now so that your family is taken care of tomorrow!
DISCLAIMER: Individual circumstances and state laws vary, so any estate planning should only be undertaken with the help and assistance of an attorney licensed in your state.
