The Blended Family Breakup: Dodging Legal Issues
By Crystal Levy, Senior Manager, Tax and Business Services
From television shows like “The Brady Bunch” and “Full House” to “Modern Family” and “This Is Us,” the modern-day household has become anything but traditional. Same-sex couples, cohabitating unmarried couples, second and third marriages, and remarriages, adopted children, and geriatric parenting are the new normal, and with that comes complicated issues. Anytime you have a complex family dynamic, it is important to have a plan in place in the event of a breakup to protect your children, safeguard assets, and alleviate conflict where possible.
The first thing any modern family should have is proper estate planning documents. This means having more than just a will in place. You should have healthcare proxies, power of attorney documents, living wills, appointment of agent for disposition of remains, and trusts (where appropriate). Additionally, beneficiary designations should be coordinated with your estate plan to make sure assets do not fall through the cracks.
Integrating a blended family can be tough, but when there is a breakup, it can be twice as hard. From settlement agreements to unraveling assets, the process is emotional and exhausting. However, as grueling as the divorce or separation can be, it is always a good idea to review and update your estate plan, or at least check in with your attorney about having documents in place during the interim stage before the legal issues are settled. You may not want your ex-partner to be making decisions about medical or financial matters on your behalf. Furthermore, updating beneficiaries on life insurance policies, retirement accounts, and transfer on death accounts should be well thought out.
Additionally, it is becoming more and more common for unmarried couples to live together before getting married — if they plan to get married at all. Just as a prenuptial agreement protects married couples’ assets, a cohabitation agreement protects unmarried couples’ home. It memorializes the parties’ mutual understandings and lays the foundation for how expenses will be paid, what happens if there is a breakup or death, how capital improvements will be handled, the parties’ financial responsibilities, and many other legal and financial concerns. For many couples, buying a home is one of the biggest purchases they will ever make; therefore the significance of the investment is much greater than just deciding how the title should be stated on the deed. The last thing you want is to end up in a scenario where there is break-up and now you have to move out and sell the house to make both parties whole again.
Whatever your circumstances, the key objective is to create an estate plan from the onset. Make sure the plan is tailored to your particular family unit and flexible for the changing times. Consult your attorney, accountant, or advisor about putting it in writing while things between family members and partners are positive and future-facing, and everyone is happy and of a mind to collaborate.