Estate Planning for the NonTraditional Family

No two people are alike, and no two families are alike. More and more often, families are being created and shaped in nontraditional ways and continue to change the way we think of families, such as single-parent families, blended families, same-sex households and children as caregivers for aging parents. In a way, nontraditional families are more the norm than the exception.

According to the U.S. Census Bureau, from 2008 to 2019, the total number of same-sex households in the U.S. increased 80% from approximately 540,000 to 980,000. Additionally, according to the Current Population Survey, the living arrangements of children in the U.S. are changing, with the number of children living with two parents down from approximately 85% in the 1960s to 70% currently. Lastly, according to Generations United, the number of Americans living in multigenerational households increased from 7% to 26% — an increase of 271% — in a decade. It is clear that the families of today do not look like the families of the past.

Everyone wants to take care of their family, and estate planning is a huge piece of that. Estate planning is generally described as the conservation and distribution of property, assets and wealth in the manner that most efficiently and effectively accomplishes one’s goals. Estate planning is inherently a goal-oriented activity — using tools, techniques and actions to achieve certain goals. Naturally, questions often arise around non-traditional family estate planning. How should they handle estate planning? What are their unique challenges? What aspects of an estate plan should they focus on? However, more often than not, a nontraditional family has the same goals and wishes for estate planning as a traditional family: to protect and distribute their assets in the way they want to. So, while estate planning for nontraditional families comes with a few unique issues, it follows the same path of stating the family’s goals and wishes, making a plan to achieve those goals, and then taking action toward those goals.

It is worth noting that federal and state estate laws are generally based on the traditional family structure rather than the wide range of nontraditional family structures. This means that traditional families are more likely to benefit from and be protected by federal and state laws. For instance, a state may have a law that leaves all of a spouse’s property to their surviving spouse if they die without a will. However, a nonspouse partner may not be afforded those same benefits and protections under state or federal law. Additionally, nonmarried partners may not take advantage of the unlimited gift tax deduction that is provided to spouses.

While estate planning for nontraditional families requires thoughtful and creative planning, there seem to be only a few differences from traditional family estate planning:

  1. Nontraditional families may not be provided the same tax, gift and estate benefits and therefore must be more meticulous and careful when making material financial decisions.
    • For example, the transfer of property between nonmarried partners may be a taxable event and should be carefully considered before being carried out.
  2. Nontraditional families must be more intentional to make sure their wishes are clearly stated and their plan effectively accomplishes their goals, as they may not have the same legal protections built into state and federal laws.
    • For example, nontraditional families may need to specifically name their beneficiaries by legal name rather than a generic class description such as “my children” because even though you may consider someone your child, the law may not.
  3. Nontraditional families may have more relationships and more goals for estate planning than traditional families. Therefore, some goals may have to be prioritized over others.
    • For example, a blended second family may have numerous beneficiaries to whom they wish to provide some benefit, so the value of the benefit to each beneficiary may need to be reduced in order to be spread around evenly.

So, while nontraditional families face unique challenges when it comes to estate planning, just like traditional families, they can create a plan that can accomplish their goals. And whether it’s for a traditional or nontraditional family, estate planning can be done by taking a few small but meaningful actions (with the help of legal, financial and tax advisors) to implement their estate plan. Some steps include reviewing and updating beneficiary designations on retirement accounts and life insurance policies, reviewing how assets such as real estate and vehicles are titled, having a durable power of attorney for someone to make decisions for you if you become incapacitated, and executing a will that names a guardian for minors if necessary and directs how and to whom property and assets will pass upon the death of the individual.

To review, non-traditional family estate planning can meet all of their goals and wishes in much the same way a traditional family would. Of course, a nontraditional family’s unique circumstances and concerns will require careful planning with the help of trusted advisors.

—-

Disclaimer: The information provided is for educational purposes only and not intended to provide any investment, tax or legal advice. Some of the information in this article is provided through linked websites. Links on this website are for informational purposes only. We do not endorse the content nor the products of these linked websites.

Bradley Burk, JD
Financial Planning Strategist

Share:

Recent Posts:

10 Ways to Celebrate Independence Day

I proudly served in the U.S. Army from 1991 to 1992 as a medic. My time serving makes me appreciate being a U.S. citizen. This holiday, I hope you do something enjoyable with family and friends. Here are ten ideas — I will likely do a mixture of them all!

Recent Quarterly Newsletters:

Thrive by Learning and Growing Edition

Read our Q2 2022 newsletter on how to thrive by learning and growing. CEO Rick Manske reflects on graduation season and what this time of achievement and change means for students and loved ones. CIO Bill Hansen writes about education savings; President Harli Palme writes about tax savings related to college expenses; Portfolio Manager Nancy Blackman cautions about hidden costs of college. Advisor Charles Thompson outlines why it’s important that we value and prioritize travel. Advisors Judd Meinhart and Hilary Daniel write about job transitions and what to do with your 401(k) and new benefits. Advisor Neal Nolan ends with 10 ways to celebrate Independence Day and we highlight announcements across our firm. We hope you enjoy this edition!

Thrive by Planning for the Unknown Edition

Our Q1 newsletter focuses on planning for the unknown. CEO Rick Manske begins with outlining the importance of implementing financial family fire drills. Sr. Financial Advisor Travis Boyer writes about handling risk and Director of Investment Management Sarah DerGarabedian discusses mindful investing and how according to Seinfeld, “Anything’s possible!” Financial Advisor Scott Kittrell outlines how to manage the increasing cost of health care, and Sr. Financial Advisor Michael Baughman covers how to determine if you need health insurance. Manager of Financial Planning Judson Meinhart provides helpful tables to fill out to determine if you have adequate property and casualty insurance. Co-Director of Tax Services Larry Harris writes about tax planning unknowns. We hope you find this edition insightful!

Recent Whitepapers:

Stay Up To Date With Parsec

Sign up to join our mailing list and receive quarterly newsletters, whitepapers, news, and more right in your inbox.