Estate Planning for Blended Families in Nebraska

Estate planning becomes more important, not less, when a family includes a current spouse, children from prior relationships, stepchildren, or multiple sets of beneficiaries.

In a blended family, a plan that sounds simple can produce a result no one intended. Leaving everything outright to a surviving spouse may provide flexibility for the spouse but no assurance that remaining property will eventually pass to children from a prior relationship. Leaving property directly to children may create a different problem by failing to provide adequately for the surviving spouse.

The right plan begins by deciding what you actually want to accomplish for each person.

Nebraska's Default Rules May Not Match Your Plan

If a Nebraska resident dies without an effective estate plan, intestacy law determines who receives the probate estate.

Current Nebraska law specifically addresses families in which the decedent has descendants who are not descendants of the surviving spouse. In that situation, the surviving spouse's intestate share is one-half of the intestate estate. See Neb. Rev. Stat. § 30-2302(4).

The result under intestacy may or may not be what the family expected.

Nebraska's Probate Code also states that its definition of "child" excludes a person who is only a stepchild. See Neb. Rev. Stat. § 30-2209(3). A stepchild therefore should not be assumed to inherit simply because a close family relationship exists.

These rules are important reminders that family relationships and legal inheritance rights are not always the same thing.

Start With the Outcome You Want

A blended-family plan should begin with practical questions:

• What should the surviving spouse receive?
• Should the spouse receive property outright or have access to it through a trust?
• What should ultimately pass to children from a prior relationship?
• Are there stepchildren you intentionally want to include?
• Should all children receive the same amount?
• Should particular property, such as a home or business, pass differently from other assets?
• Who should make financial and health care decisions during incapacity?
• Who should administer the estate or trust?
• What happens if a beneficiary dies before you?

There is no rule that every child or spouse must be treated identically. The important thing is to make intentional decisions and document them clearly.

Providing for a Spouse While Protecting an Inheritance for Children

One of the most common blended-family concerns is how to provide for a surviving spouse without unintentionally disinheriting children from an earlier relationship.

A trust can sometimes address both goals.

Depending on the circumstances, a trust can make property available for the surviving spouse under defined terms while directing the remaining property to specified beneficiaries after the spouse's death.

The terms can be designed around the family's actual assets and needs. The plan might address housing, income, health expenses, distributions of principal, responsibility for taxes and expenses, and what happens to remaining property.

This approach is not automatically appropriate for every blended family. It requires careful drafting because the surviving spouse and remainder beneficiaries may have different interests.

Stepchildren Require Intentional Planning

A close relationship with a stepchild does not by itself create the same inheritance rights as a legal parent-child relationship under Nebraska's intestacy rules.

If you want a stepchild to receive property, the estate plan and beneficiary designations should say so clearly.

The same principle applies when you do not intend for a stepchild to receive property directly but want to make sure a surviving spouse has enough resources to support the household.

Avoid relying on assumptions about what a spouse, child, or stepchild will do after your death. A good estate plan states the intended result.

Beneficiary Designations Can Change the Result

A will does not control every asset.

Life insurance, retirement accounts, payable-on-death accounts, transfer-on-death assets, trusts, and some jointly owned property may pass according to the beneficiary designation, title, or governing document.

That means a carefully drafted will can still fail to accomplish the overall plan if old beneficiary designations remain in place.

This issue is especially important after divorce or remarriage. A former spouse may still be named on an account, a new spouse may not have been added where intended, or children from a prior relationship may have been omitted from beneficiary designations.

Every important beneficiary designation should be reviewed as part of the estate planning process.

Choosing the Right Personal Representative and Trustee

Family dynamics matter when choosing fiduciaries.

Naming a current spouse to administer everything may work well in some families. In others, a child from a prior relationship may worry that the spouse is not acting fairly. Naming an adult child may create the opposite concern.

A neutral or independent person can sometimes reduce conflict, but independence also has practical and financial considerations.

Think about judgment, organization, communication skills, family relationships, location, and the ability to follow detailed instructions.

The best fiduciary is not necessarily the oldest child or the closest relative.

Do Not Forget the Family Home

The home is often the most emotionally and financially significant asset in a blended family.

Questions to address may include:

• Should the surviving spouse be able to remain in the home?
• Who is responsible for taxes, insurance, repairs, and mortgage payments?
• Should the home ultimately pass to children?
• What happens if the surviving spouse wants to move?
• Is the property jointly owned?
• Is there a transfer-on-death deed or trust involved?

These questions should be addressed while everyone is able to plan, rather than forcing family members to resolve them after a death.

Remarriage Is a Good Time for a Complete Review

Marriage and remarriage can change the assumptions behind an older estate plan.

Review wills, trusts, powers of attorney, health care documents, beneficiary designations, real estate ownership, business interests, life insurance, and retirement accounts.

Also review any premarital or marital agreement that may affect property rights or estate planning.

The documents should work together. A will or trust that says one thing and a beneficiary designation that says another can create a result very different from what the client intended. For more on when to review your plan, see our guide on when to update your estate plan.

Common Blended Family Estate Planning Questions