As California couples may know, a new marriage with a blended family takes special consideration to include all family members. One thing that is sometimes overlooked is estate planning and the potential change in taxes for both partners from their previous lives.
Tax deductions for dependent children may change when a new marriage is entered into, unless the divorce decree for the remarrying partner stipulates which parent is allowed the deduction. For instance, if two people marry and each one has two children, although the children of one of the spouses lives with them for up to half the year, the couple may not be able to take the deduction.
Tax problems may also occur if one of the spouses dies and the estate goes to another person listed in an earlier will. Not updating this important document may have unwanted and difficult consequences, potentially leaving the new spouse with hard to pay expenses. In some instances, the current spouse may owe taxes on the amount even though he or she is not inheriting.
In addition, other areas of estate planning may be affected. These include beneficiaries listed on insurance policies, trusts, pensions, retirement plans, stock holdings and bank accounts. Since some couples hold separate bank accounts, it might be beneficial to open a separate joint account for emergencies and make deposits regularly.
Decisions with regard to financial planning ensure that the grantor’s wishes are upheld and assets distributed appropriately. Revisiting a financial plan on a regular basis may help ensure that bequests are kept up to date. A married individual with a blended family may wish to consult an attorney to discuss his or her financial planning needs. An attorney might assist by drawing up appropriate documents or by making changes to existing ones.