Legal: Your Blended Family and Your Estate

Blended families, created by the marriage or common-law relationship of partners with children from a previous relationship, are becoming increasingly common. If you have a blended family, you may not have given much thought to the added complexities your new situation brings to estate planning issues – you should, otherwise your legacy may not be passed on according to your wishes.

Here's why...

In many provinces, a new marriage, common-law or civil union may render all previous wills null and void. So you can't assume that the will you prepared prior to entering into your new relationship will be enforceable.

Put simply: when you enter a new relationship, be sure to redo your will. A simple will is not enough. Here are two common misconceptions that can prevent your beneficiaries from receiving the inheritance you'd like them to have:

I can leave my entire estate to my children.

Not necessarily – if you do that, your new spouse could make a claim on your estate (through a family-law claim or a dependant's relief claim) that may consume a large portion of your assets. It is often much more prudent to leave your surviving spouse enough to satisfy any family property claims and direct the rest to the children.

I can leave everything to my spouse and when he/she dies, the total estate will pass directly to the children.

Not necessarily:

If all your assets are under joint ownership, he or she is not required to leave any money to the children from your previous marriage.
If your surviving spouse dies without a will, everything will go according to the intestacy rules under the law, which may exclude stepchildren.
If your spouse remarries, the estate could be left to his/her new spouse and/or family.
And even if your surviving spouse indicates in his/her will that all assets go to “the children”, by law that does not necessarily include stepchildren.
One way to ensure your children from a previous relationship receive the inheritance you wish them to have is to bequeath a set amount to your children and leave sufficient funds to your surviving spouse (so your will can't be successfully challenged). And that's why insurance is often an important estate planning tool for blended families.
By carefully selecting the right type of life insurance and your direct beneficiaries, you can use insurance to help meet the needs of each child and your spouse. That way, you'll have peace of mind knowing your legacy will be passed on exactly as you wish.
Other blended family estate planning options include spousal or testamentary trusts, which may or may not incorporate a life insurance component.
Blended families are much more common these days – they also face some uncommon estate planning challenges. That's why you should always seek professional advice from a financial consultant or estate-planning lawyer before reviewing your will.

(Information supplied by Damon Smith, Investors Group Financial Services Inc. For more information call 888.335.1362).

This column, written and published by Investors Group Financial Services Inc (in Quebec – a financial services firm)., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant. Insurance products and services offered through I.G. Insurance Services Inc. (in Quebec, a financial services firm). Insurance licence sponsored by The Great-West Life Assurance Company (outside of Quebec).

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