Divorce, Remarriage and Blended Families

written by Gary Altman. Esq., CFP |

Divorce , Remarriage and Blended Families – An Estate Planning Wake-up Call

How would you like your ex to inherit your property, your bank accounts and your retirement benefits despite the fact you willed them to your children?

What if your mother’s estate wound up in the hands of your stepbrother even though they were intended for you? These are just a few of the possible outcomes that can occur when family structures change because of divorce , remarriage and blended families.

The “D” Word

If you are a blended family member, then you’re in good company. Blended families outnumber traditional nuclear families. And the number is likely to grow, based on current divorce statistics and trends:

- About 75% of divorced persons eventually remarry

- 60% of all remarriages eventually end in legal divorce . Untold others will experience emotional divorce and unsatisfying relationships.

- About 65% of remarriages involve children from the prior marriage and form blended families.

Not surprisingly, divorce is not only expensive, but researchers consistently rank it as one of the most stressful life experiences. Fortunately, there are numerous organizations and support groups dedicated to helping blended families with these challenges. However, little attention has been paid to the critical Life & Estate Planning challenges of blended families. These challenges include disinheriting your ex-spouse, protecting your own children, providing for your new spouse and minimizing your estate taxes.

The “Ex” Factor

Will your ex-spouse inherit your retirement money, even if the laws of your state automatically extinguish their interest in the assets of your estate?

It depends. In Egelhoff v. Egelhoff, 121U.S. 1322 (2001), the United States Supreme Court held that federal law under the Employee Retirement Income Security Act of 1974 (ERISA) preempted state law regarding the retirement plan of a recently divorced and deceased man. Mr. Egelhoff had failed to replace his ex-spouse with his children as the named beneficiaries of his retirement plan prior to his death. State law automatically disinherited ex-spouses. In a 7-2 decision, the Court found that the retirement plan administrator must follow the ERISA statutes requiring distributions to the named beneficiary, even when the end result conflicts with state law. Bottom line: Mr. Egelhoff’s former spouse inherited the sizeable ERISA retirement plan instead of his own children.

Assuming you have removed your ex-spouse as the named beneficiary of your ERISA retirement plan, does the rest of your Life &Estate Plan protect the inheritance of your children from your ex-spouse?

Without proper legal planning, your ex-spouse (as surviving parent/guardian) would likely be appointed by the probate court to manage the inheritance you leave to your minor children.

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