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Blended families present unique estate planning challenges

Families are gathering for the holidays. But in many instances, the makeup of those families has shifted away from what was once a norm of father, mother and two-point-five children. That concept of nuclear family has, for many in New Jersey, been replaced by one that is dominated by transience.

The reality of blended families presents unique estate planning challenges in making sure every heir is dealt with fairly in the event of death of one or both spouses.

On the chance that many families might take advantage of the holiday togetherness to talk about this issue, we offer the following options for planning:

•· Revocable living trusts: This tool may not be for everyone. Consult an attorney. It is a tool that can deliver much the same end as a will, but with a difference. Living trusts aren't necessarily subject to probate at the death of a spouse, which can protect some of the value of an estate. Should the death be an unexpected one, the trust can become irrevocable, ensuring that heirs are protected.

•· Restricted beneficiary form: For tax purposes, most individuals in a blended family situation may want to allow for the tax-free rollover of an individual retirement account (IRA) to the spouse upon death. But a restricted beneficiary form may allow a person to protect an IRA so that the principal remains intact. Income from the IRA can be stipulated for payment to the spouse. The protected principal can then be distributed to children at the spouse's death.

•· In-law protection: If there's a concern that one of your heirs is married to someone of questionable character, there is protection for that, too. Thanks to laws in most states, creditor protection can be obtained that can insure that any assets bequeathed to a child won't be subject to property distribution if the child eventually divorces the undesirable in-law.

These ideas tend to rely on the use of annuities purchased through insurance companies. With all the potential for fraud that exists, it makes sense to explore these options with the aid of an attorney.

Source: Hitchedmag.com, "Protecting Your Assets and Heirs in a Blended Family," Jean A. Dorrell, Nov. 9, 2011

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