Insights from research by Hugh Magill, Former Vice Chairman at Northern Trust.
Estate planning has not caught up with changing family structures. Work with your advisors to overcome this disconnect.
Thirty years ago, a traditional family was considered to be a husband and wife who married at an early age, bought a home, had children and worked toward financial security. Today, with the rise of blended families, artificial reproductive technology, cohabiting couples and other household trends, that “traditional family” represents only one-third of American households.
The other two-thirds of families often have unique needs that challenge traditional models for estate planning and trust management. If yours is one of them, work with your advisors to create a new model to better suit your goals.
Family Structures Have Become More Complex1
More Complex Families Are Less Likely To Have A Plan
Health & retirement study findings (% of respondends without a will)
Key considerations for building modern estate plans
Do not delay creating or updating your estate plan due to remarriage, divorce or other complex family circumstances. While making decisions about wealth transfer might be more difficult for you, an insufficient plan can lead to wasted resources, broken relationships and other unintended consequences.
Look for estate planning advisors who have served families like yours. Conventional planning favors traditional family structures and equal wealth bequests. Your plan will benefit from someone sensitive to and experienced with creative solutions for contemporary families.
If you remarry, clarify your intentions through pre- or post-nuptial agreements. You and your new spouse should mutually understand how you will distribute your assets to your children, your spouse’s children, mutual children or other beneficiaries. Additionally, agree on key decisions early, such as how to collectively use your estate and gift tax exemptions.
Evaluate alternative wealth transfer strategies if your family is blended. For example, if you remarry and have children from a previous marriage, lifetime gifts to your children (rather than after-death bequests) could promote better family dynamics.
Clarify and expand trust provisions and other estate planning terms to address previously overlooked issues, such as:
- Carefully defining your beneficiaries. For example, if you set up a trust for your grandchildren, would you like to expand your definition of future grandchildren to include step grandchildren or those born through artificial reproductive technology?
- Contemplating scenarios where your children never marry but remain in committed relationships and have children.
- Aligning your estate planning documents with your religious or cultural traditions relating to end-of-life issues and inheritance. For example, does your living will or health care power of attorney fully reflect your values relating to end-of-life issues? Are the provisions of your trust agreement relating to investments or discretionary distributions consistent with your values?
Regardless of your family’s unique needs, be aware that U.S. law and common estate planning practices tend to favor traditional family structures. This awareness will help you think more carefully about what specific provisions you need to make, leading to better discussions with your advisors and your family – and ultimately – a better plan.