Beyond the Basic: Estate Planning Strategies for Modern Families
Today's families take many different forms. Some are blended through divorce and remarriage
while others are built through long-term partnerships, adoption, or fostering. Families may
include same-sex or opposite-sex couples; married or unmarried partners; or children from
different relationships or no children. Many households also juggle the needs of aging parents
or relatives with disabilities.
You can probably picture many other family arrangements. While no single standard family form
exists in the United States, certain trends stand out. Americans are marrying later in life.1 A
growing share has never married.2 Interracial, interethnic, and same-sex marriages are more
common.3
As today's modern families evolve and become more diverse, so too must the estate planning
strategies that protect them.
Blended Families
The term stepfamily has largely given way to blended family (or bonus family). However, they
describe the same thing: a family that forms when partners bring children from previous
relationships into a new household, possibly alongside children they have together.4 And the
issues these families face, both in maintaining family harmony and in planning their estate, can
be complex, no matter what you call them.
Potential planning goals: Provide for a surviving spouse while ensuring that children from a
previous relationship receive an inheritance. Some parents in blended families may also want to
provide for stepchildren; however, this goal requires purposeful planning because state law
does not automatically provide for them.
Strategies: A revocable living trust is an effective estate planning tool for parents in blended
families. With a trust, your client can provide for their surviving spouse for their lifetime - for
example, by allowing them to receive income from the client's trust (and possibly principal as
well, under conditions your client sets) - while still preserving the remaining balance for children
from a prior relationship. This approach helps prevent the unintentional (or intentional)
disinheritance that may occur if everything is left outright to the spouse.
Trusts can also include detailed instructions about how assets should be used and what
happens to any remainder. The key is finding the right balance of fairness and protection within
the unique dynamics of a blended family, where emotions and relationships can be complex and
solutions should be flexible and nuanced.
Unmarried Partners
The number of unmarried couples living together has steadily increased, more than doubling
from 3.7 percent in 1996 to 9.1 percent in 2023.5
Whether couples choose not to marry for personal, financial, or other reasons, the main
planning challenge with unmarried partners is that default inheritance laws still favor spouses
and blood relatives, despite the uptick in cohabitating partners.
Potential planning goals: Ensure that a surviving partner is financially secure; can remain in
the shared home (regardless of whether the deceased partner owned the home or the two of
them owned it jointly); and has legal authority to make medical or financial decisions if the other
becomes incapacitated. Couples may also want to provide for children from their relationship or
prior relationships and avoid disputes with extended family who stand to inherit under state law.
Strategies: Because unmarried partners have no automatic inheritance rights and lack many
legal protections from which married couples benefit by default, forward-looking estate planning
is necessary.
A person can provide immediate or ongoing support for their partner in a will or a trust, although
only a trust avoids the public and often costly probate process. Some forms of joint property
ownership or carefully structured beneficiary designations (such as transfer-on-death deeds or
beneficiary designations on retirement accounts) can help ensure that assets pass directly to
the surviving partner.
Advance healthcare directives and financial powers of attorney are also needed to give partners
decision-making authority in emergencies or while one partner cannot manage their own affairs.
Without such strategies, partners risk being treated as legal strangers, and family members will
likely be the ones making financial and medical decisions.
Loved Ones with Special Needs
Special needs is a broad term that encompasses many situations in which a person may require
specialized services or support to manage everyday life.
An individual with special needs may have been born with a physical or cognitive disability, may
require a wheelchair due to an accident, or may struggle with severe depression or anxiety. In
some cases, their condition may qualify them for means-tested government benefits, which
could be at risk if they were to receive a large inheritance outright. Whatever the situation,
careful planning can protect them while still providing support.
Potential planning goals: Allow the loved one to receive an inheritance in a way that does not
disqualify them from government benefits or put them at financial or personal risk. The goal may
also be to encourage healthier behavior while ensuring their needs are met.
Strategies: A supplemental needs trust can provide financial support without jeopardizing
eligibility for programs such as Medicaid or Supplemental Security Income (SSI). This type of
trust is designed to limit direct access to the inheritance while ensuring that it is used for the
needs of the person with the disability, with a trusted individual (the trustee) making distributions
at their discretion.
For individuals without a functional disability but who may not do well with receiving a large sum
of money all at once - for example, they struggle with money management or substance
abuse - an incentive trust may be a helpful tool. This type of trust is not aimed at preserving
eligibility for certain government benefits; rather, it allows the client to set conditions such as
distributions tied to employment, education, sobriety, or other goals and milestones to provide
support and protection for the beneficiary.
Sandwich Generation
The term sandwich generation refers to adults who support their aging parents and their own
children. According to an AARP research report, about 16 million US adults meet this criterion,
and almost one-third of family caregivers in the US have children or grandchildren under age 18
living at home while they also care for an adult family member or friend.6
Depending on the client's age, their child could be a minor under 18 or a young adult still
working on gaining financial independence. Their parents may be entering retirement or well
into their 80s or 90s. These different types of "sandwiches" may carry different balancing acts in
terms of time, finances, emotions, and planning strategies. They also require different estate
planning considerations.
Potential planning goals: Protect the client-caregiver while ensuring that their parents and
children are cared for and that there is a seamless transition of decision-making authority,
guardianship, and financial support if something happens to the client-caregiver.
Strategies: If the children are still minors, naming guardians is one key part of your client's
estate plan. Your client can make guardianship nominations in a will or a standalone document,
depending on state law, so a judge is not choosing a guardian without guidance or input from
the parent.
Your client should also consider including a revocable living trust in their plan. A trust can do
more than simply avoid probate; it can ensure that critical financial support for your client's
parents and children continues even if the client becomes incapacitated. After the client's death,
distributions can be structured to provide for their minor and young adult children in stages as
they grow, while also supporting aging parents who may need assistance but should not have
unrestricted access to the funds if they cannot manage their own affairs. This flexibility allows
your client to protect everyone they care for in a way that balances their needs with responsible
oversight.
Every family is different, especially within the evolving dynamics of the American family. More
than ever, estate planning should avoid an out-of-the-box, one-size-fits-all approach and
individually and collectively address the unique needs of each family member, now and in the
future. If you have clients in any of the above-mentioned categories, it is important that they plan
for their own future and that of their loved ones. Call us to discuss ways we can partner to serve
these clients.
MEREDITH | PC
4325 Windsor Centre Trail
Suite 400
Flower Mound Texas 75028
214-513-1013
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.
You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.
