Justin Clark, CFP®,
Senior Wealth Manager
Family is about unconditional love, support, and protection. Today, family structures can take many forms beyond a traditional married couple and their children. In fact, according to Forbes, less than 18% of American adults currently fit into this nuclear mold.1
However, diverse (or non-traditional) families without comprehensive estate plans may be at higher risk of losing custody, assets, and benefits in the event of a loved one’s unexpected death or incapacitation.
Let’s explore key estate planning considerations for diverse family structures—including strategies to protect your loved ones and distribute your assets according to your wishes.
Estate Planning Challenges and Considerations
Common examples of non-traditional families include single-parent households, families with adopted or foster children, extended families, LGBTQ+ families, blended households, as well as opposite and same-sex unmarried couples.
In the United States, numerous legal protections, rights, and benefits are explicitly afforded to married couples, including inheriting assets from your spouse, receiving estate and gift tax exemptions from property you give or leave to your spouse, filing for step-parent or joint adoption, and collecting spousal government, employment or education benefits.2
In 2015, the Supreme Court ruled that same-sex couples in the U.S. have the legal right to marry. Currently, this means that if you’re in a formal same-sex marriage, you are entitled to the same state and federal benefits as a heterosexual married couple. However, these benefits and rights are not guaranteed by the federal government for those in domestic partnerships or civil unions.2
As such, if you are part of a diverse family structure, it’s critical to work with your estate planning team to implement strategies to:
- Appoint legal guardianship of minor or dependent children
- Specify how assets (including real estate) should be distributed to your surviving spouse and children from a current or previous relationship
- Ensure state probate laws or will challenges do not override your wishes regarding inheritance
- Protect your surviving spouse or partner’s rights to manage the finances of minor children if you pass—and make financial or medical decisions if you become incapacitated
- Plan for a smooth succession of your business
- Minimize the impact of estate and income taxes on your heirs
Estate Planning Tools for Diverse Family Structures
Estate planning is essential to ensure partners, new spouses, step-children, foster or adopted children, and loved ones from multiple relationships are accommodated and protected in the event of a death.
Even if you are married—particularly if it is a same-sex marriage—it’s critical to provide your spouse or partner with the legal authority to make crucial decisions in one or more of the estate planning documents below.
Last Will and Testament: A will is a legal document outlining how you want your assets distributed to your loved ones and appoint guardians for minor children and pets. If you die without a will, your estate must undergo a public probate according to your state’s intestacy laws—which typically do not favor step-children or unmarried partners.
Durable Financial Power of Attorney (POA): This legal document authorizesa trusted person to make financial decisions if you become physically or mentally incapacitated.
Living Will: Also called an Advanced Healthcare Directive, this explicitly outlines your wishes for emergency treatment and end-of-life care, should you be unable to communicate them on your own.
Healthcare Proxy: This legal document allows your spouse or partner to make medical decisions if you become seriously ill, injured, or otherwise incapacitated.
HIPPA Authorization: This form allows doctors and other medical providers to discuss your medical records and disclose health conditions with your healthcare proxy.
Trusts: These legal arrangements offer greater control over how assets are managed and distributed than a will alone. With a living trust, you can make changes—such as adding or deleting beneficiaries—as needed. Trusts may also help:
- Avoid a costly and time-consuming probate
- Maintain privacy by keeping your affairs out of the public record
- Shield your family from excessive federal or state taxes
- Customize how and when your minor children will inherit assets
- Safeguard assets from lawsuits, creditors, or divorce settlements3
It’s important to review your estate planning documents regularly to reflect changes in laws or your family’s financial circumstances. Do not forget to confirm that your beneficiary designations for life insurance, investment accounts, and retirement accounts typically align with your current intentions and family dynamics.
Protect Your Family & Your Wealth
Estate planning for diverse family structures can be complex and daunting.
Tiller Private Wealth can ease stress, help you navigate the challenges, and work with your estate planning attorney to develop a robust plan that addresses them.
Schedule a consultation today to achieve peace of mind for yourself and your loved ones.
Sources
1 https://www.forbes.com/sites/ashoka/2024/04/02/how-expanding-the-legal-definition-of-family-helps-us-all
2 https://www.nolo.com/legal-encyclopedia/marriage-rights-benefits-30190.html
3 https://www.bankrate.com/investing/what-is-a-trust/
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