Have a blended family? Here’s what you need to know about blended family estate planning in Arizona.
Are you part of a blended family and living in Arizona? If you are, here are some hard and fast Arizona rules you need to understand now about your estate planning needs – before it is too late. Because if you die without a plan in place, your assets could be distributed unevenly and unfairly.
When we talk about estate planning, we’re referring to the legal process of designating who receives what in the event of your death. Estate planning involves the management and transfer of your estate after death and refers to your will, trust, insurance policies, etc. It’s a good idea to keep your estate plan updated to ensure that your wishes are carried out as you intended and your family is protected.
But what happens when you are part of a family that consists of yours, mine and ours?
Why is estate planning so important for blended families?
Estate planning in Arizona can get complicated, especially with blended families. A blended family is a family in which one or both of the parents have children that are not related to the other parent, such as a stepparent and stepchild. When children from previous relationships are involved, estate planning is the best way to ensure that every child is protected according to your wishes. Preparing an estate plan can help your family avoid probate court, more legal fees, and unnecessary fighting or tension among loved ones.
Without estate planning, your assets could be unevenly or unfairly distributed.
What do we mean by this? Well in Arizona, the rules of intestacy dictate that when someone dies (by definition without estate planning), and the person who died is a widower (and let’s say had three children), then all his or her assets would be divided equally between his or her children. That sounds fair enough.
But when you die leaving behind a blended family situation, that equation changes and your assets are instead divided by family group. This is complicated – so below are some scenarios to help understand.
- Scenario 1: You are divorced with children from a previous marriage. You remarry and you have a child with your current spouse. When you die intestate (i.e. if you die without any estate planning in place), here is how the assets are divided by the State of Arizona:
- 50% of your assets are given to your legal spouse and the biological children with that spouse
- 50% of your assets are given to the children from your previous marriage
- Scenario 2: You are divorced with one adult child from a previous marriage. You remarry and you have three younger children with your current spouse. Somehow both you and your spouse die together without any estate planning in place. This is how the assets are divided by the State of Arizona:
- 50% of your assets are given to your adult child from a previous marriage
- 50% of your assets are given to the three younger children from your second marriage
In other words, the assets are divided amongst your four children as follows:
50% of your assets are given to your adult child from a previous marriage
16.6% of your assets are given to the eldest child from your second marriage
16.6% of your assets are given to the middle of child from your second marriage
16.6% of your assets are given to the youngest child from your second marriage
Not exactly fair is it?
What about your home? How is it divided without an estate plan?
Depending upon how the house is titled, your children from a previous marriage may actually be entitled to 50% ownership of your home, regardless whether or not your current spouse is alive or even occupying the home – or even if your adult child from your previous marriage has never lived there one day in their life, or stepped foot in the home.
That means your surviving current spouse may be required to buy out children from your first marriage just to keep the home.
All children must be mentioned. Look the other way and your loved ones could pay the price.
Here’s one final note about asset allocation with blended families and estate planning. So you now recognize the importance of setting up a Living Trust & Revocable Trust to protect your blended family, but be absolutely sure to tell your estate planner about ALL of your children.
Let’s say you no longer have a relationship with a child and do not wish them to inherit any funds upon your death. Did you know you are required to name that child and purposely state your intentions for their inheritance?
If you do not include the child in your estate plan, this may not mean they will not get an inheritance upon your death, and they may still be entitled to part of your estate. Excluding them from the document is not a guarantee of estate exclusion.
You MUST inform your estate planner about all of your children to ensure that they are able to write an estate plan that conveys your wishes precisely, even if it means stating one child or another is not entitled to anything.
How to start preparing your estate plan for a blended family in Arizona
The best way to start estate planning for your blended family is to talk to your partner or spouse! You’ll want to consider how each child is accounted for, including the dynamics between siblings and stepsiblings, in addition to suitable guardians. You can name an executor, often a friend or relative, to act as an unbiased mediator during the transfer of assets.
When estate planning in Arizona, parents in blended families should take extra precautions when dividing up assets and funds. We recommend establishing a living trust that provides for each child in a blended family, according to your wishes, to guarantee that they receive their inheritance and are protected from unfair treatment later. In Arizona, a revocable trust– also called a living trust– can help your assets avoid probate.
Blended family and estate planning options
Just as each blended family is unique, the best estate planning option is the one that has considered each family member and their unique relationship and specific needs. Within a blended family, there are often concerns about the equal distribution of assets, the amount inherited, or who should be named successor trustee of the estate. While these might be difficult topics to bring up, it’s crucial to address all your options to really enjoy the benefits of estate planning for your blended family. If you live in the greater Phoenix area, there are some flexible options to help protect your estate and family.
Family trusts
In a family trust, all assets are transferred into a combined trust. This simple structure allows the surviving parent to determine how to distribute assets according to each child’s specific needs. Since this is a testamentary trust, it won’t avoid probate and is irrevocable, meaning that it cannot be changed after death.
Marital trusts
In a marital trust, assets are transferred to the surviving partner, with the intention for children to inherit after that parent’s death. This option requires both spouses to commit to the estate plan to include all children but can get complicated after many marriages.
Revocable trusts
In a revocable trust– also called a living trust– assets remain under the control of the grantor as long as they are still living. Revocable trusts are a great option for blended families in Arizona. In Arizona, a revocable trust can provide flexibility as your family grows and help your assets avoid probate later. This is predominantly the trust that is done in the state of Arizona.
For blended family estate planning, talk to one of Evergreen’s experienced estate planners.
Estate planning can get complicated, but it doesn’t have to be! Remember that within growing and blended families, losing a parent can feel like losing a connection or losing their place within the family. By making proactive and informed decisions about the future of your estate, you can guarantee that everyone in your family is protected the way you intended.
Don’t leave anything to state intestacy laws! If you live in Glendale, Peoria, Scottsdale, Mesa, Gilbert, Chandler, Cave Creek, Queen Creek, Fountain Hills, Tempe, or the greater Phoenix area, Evergreen Estate Planning can bring your blended family the peace of mind that comes with comprehensive estate planning.
Common questions about estate planning in Maricopa County
Does a simple Will work for my blended family?
In a simple Will, all assets may be left to the spouse with the understanding that the spouse care for the children and preserve their inheritance. But with a blended family, no– a simple will is not enough. A will neglects to protect all children, as the surviving spouse is not legally obligated to distribute assets to the deceased’s biological children. Regardless of good intentions, a simple will is going to be subject to Probate, lengthy waits for asset allocation, thousands spent in legal bills, and can result in huge complications for blended families in the long run.
Do I need a new estate plan after remarriage?
Yes! The simple answer is you should always update your estate plan after a divorce or remarriage. And if children are involved, keeping your estate plan updated is even more important! Your estate plan is the only way to guarantee that your children are protected, cared for, and your best wishes carried out–which will be critical when it comes down to handling healthcare and beneficiaries. If you’ve recently gone through a divorce, you may need to check your existing estate plan to revoke any documents made with a former spouse.
