A holistic approach to estate planning for blended families is needed as mistakes could cause irreparable damage to finances and family relationships, according to Stanford Brown.
The private wealth firm’s adviser Kirsten Lynn said while tax effectiveness and asset protection was important, so too were legacy and the preservation of family bonds.
Lynn said six planning mistakes that blended families needed to avoid were:
- Expecting a single solution;
- Not asking about beneficiaries’ hopes and expectations;
- Focusing only on what happened after death;
- Intermingling family finances;
- Tying beneficiaries together financially; and
- Assuming the family would never be blended.
“There is no one single solution. Blended families and their advisers will generally settle on a strategy in line with the competing responsibilities and goals, and the emotional and financial trade-offs,” she said.
Lynn noted that thinking about transferring wealth before death could open up planning opportunities such as providing help to a child when it was most needed, making a philanthropic gift when you see the impact, or undertaking lifetime restructures of an asset base.
On avoiding intermingling family finances, Lynn said that it was important to keep in mind the accumulated wealth of couples that had more than one family when they managed their joint finances.
“It’s worth getting advice about how your decisions now affect your plans later on. It isimportant to take the time to plan before you sell your home or help your partner renovatetheir house, or before you buy a home as joint tenants,” she said.
Lynn said estate planning was about protecting loved ones if anything happened and protecting wealth a couple had built together to benefit their children.
“Ultimately, how you plan for the transfer of your family wealth can help to preserve orcontribute to damaging relationships in your family,” she said.
“You should consider whether your financial and estate planning recognises your values,your family dynamics, and the goals and interests of the parties involved.”