The traditional nuclear family is largely a thing of the past. Blended families, in which one or both spouses have children from previous relationships, are an increasingly common phenomenon. “Nontraditional” families, including blended families, now outnumber traditional families in the United States. Furthermore, the number of children with disabilities has steadily increased, as well, with almost one in five children having a special health condition, whether it is a chronic illness, developmental disability, neurodivergence, or mental health condition.
Families that have a child with special needs may face certain challenges, especially in the context of a blended family. One of those challenges is crafting a financial, caregiving, and estate plan that will adequately protect the needs of a child with disabilities, while at the same time taking other children into account. Taking a proactive approach to planning your family’s future is likely the best way to achieve your goals.
Estate planning for a blended family can be difficult, particularly when each spouse brings different levels of assets and earning capacity to the marriage, or one spouse has a child who likely will need significant future support. The reality is that caring for an individual with significant disabilities can cost millions of dollars. However, allocating more of your estate to one child over others can create resentment, especially when the children have different biological parents. On the other hand, an equal division of assets between children may not be fair, either, if one child has future financial needs that the other will not.
Creating a future caregiving plan for your child with special needs can also become more complicated in a blended family. For instance, appointing a guardian for your child with special needs is crucial. While a stepparent may have been the daily caregiver for the child for an extended period, a stepparent would not be able to legally keep the child in their custody unless explicitly named by the biological parent. Other relatives also may believe that the child should be placed with a biological relative, which can lead to familial disputes. Approaching these challenges directly and making your decisions clear can go a long way to avoiding these types of problems.
A special needs trust (SNT) is often the best way for a child with disabilities to receive an inheritance, because it avoids disqualifying the child from Medicaid and other means-tested government programs. However, determining who should contribute to the SNT can be more complicated. A stepparent certainly has no legal obligation to contribute to an SNT or provide any financial support for a child with special needs. However, the question then becomes how a biological parent can create an estate plan that funds an SNT while still providing for a surviving spouse and, potentially, for stepchildren and children of that marriage.
Another wrinkle in estate planning exclusive to blended families is preexisting divorce settlements containing child support, spousal support, or payment of college expenses. First, child support for an adult child with disabilities can prevent the child from getting benefits unless the court order for the child support is carefully written to refer to a properly drafted first party SNT.
Furthermore, these preexisting financial obligations can strain family resources and leave fewer assets to dedicate to an SNT or inheritance. For example, to maintain those financial obligations, a biological parent may have to limit a new spouse’s access to assets, both now and in the future, through an estate plan. Subsequent deaths and remarriages can only further complicate the equation.
Again, to avoid future legal disputes, careful, thoughtful planning that involves all family members is key. Failure to create a clear estate plan that all family members know of can result in costly legal battles and a lack of financial and other types of protection for a child with special needs.
In most cases, the biological parent should create an SNT for the child with special needs and have a clear plan for funding that SNT. The biological parent and stepparent should specifically designate what assets should go to fund the SNT and the source of those assets. Parents should calculate the anticipated costs of care for the child and attempt to fully fund their future needs, if they can do so.
Furthermore, parents can direct the distribution of life insurance policies and retirement plans by making beneficiary designations. However, to the extent that a parent wants to fund an SNT with the proceeds of a life insurance policy or retirement account, the beneficiary should be the SNT, not the child with special needs. Otherwise, you risk making the child ineligible for means-tested government benefits.
Naming a guardian for your child with special needs is paramount. Still, you must carefully consider the best choice for that role and expressly communicate it to all interested family members. Drafting a letter of intent to assist future caregivers and trustees concerning the child’s needs and routines is also an extraordinarily helpful step to take as part of your estate plan.
Updating your estate plan as life changes is also key. Remarriages, adoptions, deaths, and births all should prompt you to review your estate plan and beneficiary designations regularly. Your goal is to ensure that your estate plan meets the needs of your child with special needs, as well as your other financial goals.
Finally, holding periodic family meetings to discuss these matters and provide family members with information about the decisions you have made. Being transparent about your estate plan and choices can help avoid expensive litigation in the future.
Frequently Asked Questions
What happens if I don’t have a will or die without an estate plan in place when I pass away?
Illinois intestacy laws determine how a person’s assets are distributed if they die without a will. Assets typically go to a surviving spouse and biological children, which doesn’t necessarily provide for children from different relationships and stepchildren.
How can a second or subsequent spouse affect the distribution of assets under my estate plan?
Suppose you haven’t adequately provided for your surviving spouse, instead leaving the bulk of your estate to a biological child or someone else altogether. In that case, your surviving spouse has the right to claim an elective share of the estate. If you have children with your spouse, the elective share is typically one-third of your estate, which can leave your children from other relationships receiving fewer assets than you intended. This situation can be especially dangerous when it comes to a child with special needs, who may end up with less access to your assets than you planned.
How can a blended family impact a power of attorney and/or healthcare directive?
The choice between naming a second or subsequent spouse and your biological children can be extraordinarily difficult and cause resentment between your spouse and children. Talking through these issues as a family and reaching a consensus based on input by all parties can be the best way to resolve this situation.
Contact Us Today to Learn More About Our Legal Services
Rubin Law is the only Illinois law firm to dedicate itself exclusively to providing compassionate legal services for children and adults with special needs. We offer unique legal and future planning techniques to meet your family’s individual needs.
Call us today at 866-TO-RUBIN or email us at email@rubinlaw.com to learn more about the services we can offer you and your family.