Update prepared by Mary Humphreys

“Procrastination is like a credit card: it’s a lot of fun until you get the bill.”

Christopher Parker 

In this update, we discuss some of the considerations when planning for blended families. In this instance, it is your loved ones that pick up the bill, so here we look at some of the considerations for offshore wealth planning for blended families. 

It is widely accepted that no two families look the same. When speaking with our clients we see the full spectrum where their families are made up of children or grandchildren from multiple relationships, which necessitates careful consideration and, of course, planning. 

In our view, one of the many vital complications that is all too often overlooked is wealth planning for a “blended family.” This term is applied to families where people have remarried and have children from previous relationships. 

So many people that we speak to who are entering into a blended family already have a will or a wealth plan created in a previous marriage – which in many instances they fail to update. Others assume that if they just leave everything to their new spouse, that person will automatically pass benefits down to the children from each marriage in a fair and equitable manner if they themselves die. Plenty of others never bother to create a wealth plan of any kind, or even write a will. In each case, the result will almost certainly be disaster.

Wealth planning where there are, for example, second marriages can be a potential minefield that requires considerable thought. The issues that blending brings up, both emotional and legal, are extremely complex, but a savvy advisor can help you see around corners and make your assets work for multiple families in ways you didn’t even know were possible. 

Let’s start with the worst-case scenario: no plan at all. Whenever someone dies with no clear plan for their estate, or their plan has gone out of date, their estate will likely end up in probate court. Probate means that a court takes over to decide how a deceased person’s assets should be distributed. It’s often a long, incredibly costly process that far too often results in battles between relatives – especially within a blended family.

Probate is like legal purgatory. With a blended family, it can be worse; perhaps purgatory with a knife fight.

The good news: there are options to wealth plan for blended families. For starters, upon any big life event such as birth, death, divorce, marriage, or an inheritance for you, your spouse or your heirs, these are all opportunities to revisit “the plan”.       

We have seen the turmoil when the matriarch or patriarch have not been transparent with creating an equitable structure. By being transparent, it can prevent a fight breaking out between family members. As Floyd Mayweather said, “boxing is easy, life is much harder”. 

The tax benefits associated with offshore structures rise and fall depending on the political climate of the moment. However, a trust structure can be tailored to one’s specific preferences; for example, where all of the children can be treated equally or, alternatively, bloodline may be favoured over non-bloodline. 

For some of our clients, they may have separate advisors for tax, legal and investment matters from their partners. We encourage consideration of an introduction to the respective advisors so that each is familiar with the individuals and institutions that may be able to assist in the future when needed. Adult children could also be brought into the conversation and introduced.

Family meetings can be a helpful way to determine where potential conflicts among your spouse, children and step-children may exist. Family meetings are also a forum for you to express your desires regarding your estate plan. Hearing you express your goals in your own voice may help alleviate future misunderstandings about your wishes among your family members.

Dynamics, estate size and circumstances are unique to each family. It is essential that you consult with your trustee to determine which planning options are best for you. Proactive planning and discussions during your lifetime can be very beneficial for you and your blended family. Please feel free to contact us to discuss further.