The days of mostly traditional American families are probably gone for good. The modern family of today is often a mix of spouses, exes, kids, and steps who somehow find a way to make it all work. Estate planning for such an intricate blended family may be a little tricky, and there are lots of factors to consider.
With blended families, it is important to give significant thought, time, and attention to the many planning issues regarding financial, insurance, and tax related matters. While traditional estate planning documents are critical, it is also important to consider a prenuptial or a cohabitation agreement. Either one of these agreements should spell out, in as much detail as possible, what will occur if the relationship dissolves, regardless of whether or not the couple is married.
One of the major issues that this agreement should address is housing. Both parties may be liable on a mortgage, and it is very important to consider the status of the real estate upon dissolution of the relationship.
There may also be provisions within the agreement relative to the distribution of assets upon death. In cases where there is a significant mortgage, the parties may consider purchasing life insurance to cover the outstanding balance of the mortgage so that the survivor may receive sufficient liquid assets to continue paying the mortgage despite the loss of one income.
Additional life insurance may also be necessary if one of the parties is under an order of the court from a prior divorce decree wherein a percentage of assets is required to be maintained for the benefit of children from the prior marriage.
These are just a few of the issues that blended families will likely face. For a more comprehensive analysis of your situation, it is recommended that you meet with a qualified estate planning attorney.
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