There are two words that Mark Parthemer knows will make his job more complicated: “blended family.” Parthemer is a chief wealth strategist at the management firm Glenmede, where he guides estate planning.
Historically, inheritance has passed from parents to their offspring, and this setup often still guides estate planning today. Yet when families are blended — with multiple marriages, divorces, remarriages, and adult children from various relationships — that traditional framework becomes convoluted.
“There are dynamics there that really demand diplomacy, tact, sensitivity, and a holistic perspective,” Parthemer says.
Marriage, divorce, and remarriage — whether of the adult children or of the family matriarch or patriarch — should be considered in any estate planning.
“Most families avoid this topic because it feels uncomfortable or ‘unromantic,'” says Donna Cates, a certified divorce financial analyst and founder of Money Matters Wealth Solutions. “But the truth is, talking about the financial realities of marriage and divorce is one of the most loving things a family can do.”
Here’s how to get started, according to three financial experts we spoke to.
Begin with the end in mind
With the complications of a blended family, it’s even more important to center conversations about love and money around the legacy that you wish to leave, Parthemer suggests.
He refers to this as “beginning with the end in mind.” Consider what purpose you’ve chosen for your money. Then, reverse engineer an estate plan that delivers that.
For example, you might be happy for your widow(er) to remarry in the event of your death, but wouldn’t want their new spouse to have access to funds that might otherwise go to your children and grandchildren. In that case, you could leave a set amount of money to your widow(er), and also give inheritance to your children or grandchildren directly, or protect it in a trust for them, experts told Business Insider.
Ideally, start with a prenup
A prenuptial agreement — which outlines which assets in a marriage are shared, and which remain separate property — is the gold standard in being prepared for estate planning in a world where divorce is common, Parthemer says.
The specifics of a prenup are highly individual, but they can stipulate that inheritance not be considered a shared asset if a divorce happens.
If you don’t have a prenup, it’s easy for inheritance to become shared property with your spouse, which means that they’re entitled to a portion in the event of a divorce.
Cates worked with a family where the matriarch left a beach house to her daughter. The daughter and her husband at the time used the house personally and rented it out. When they divorced, the husband was entitled to partial ownership of the home, even though Cates says it was clear the mother intended the home to belong to her daughter.
Only about 15% of Americans who have been married have signed a prenup, according to a 2022 poll, but data show the agreements are becoming more common, and 42% of Americans say they support the use of prenups. Experts say that’s because people have seen firsthand the harm divorces can have on finances.
“Many of them have realized that a divorce or separation can unravel generations of wealth,” says Libby Leffler, founder and CEO of First, an online prenup platform.
Leffler regularly sees the older generation reaching out to First to get information on how their adult children can set up prenups. She also sees the younger generation encouraging their parents to sign a prenup before remarrying in their golden years. So, don’t be afraid to talk with your loved ones about the agreements.
Experts say there’s some taboo about prenups among the older generations, but millennials and Gen Z have few hangups about the agreements.
“We see the conversation around prenups as being totally mainstream,” she says. “It feels as if we’re in the midst of a generational shift in terms of how people are talking about money.”
Pause before using inheritance
If you don’t have a prenup in place, but receive an inheritance, Cates recommends pausing to talk to an attorney and a wealth advisor before using any of the money or assets.
“Ideally, you’ll put a postnup in place,” she says, referring to an agreement that, like a prenup, outlines how assets are to be handled in the event of divorce, in this case, the inheritance.
In most cases, inheritance is not automatically considered marital property, Cates explains. However, as soon as the funds are mingled with marital assets or used to support the family, your spouse may have a claim to them — like that beach house she mentioned earlier.
Consider a stealth prenup
The older generation ultimately can’t control whether their children and grandchildren get prenups. However, they can structure their estate plan “to minimize the need for the next generation to have a prenup,” Parthemer says.
He calls this the stealth prenup, but emphasizes that there’s nothing sneaky about it. In fact, the stealth prenup can be a gift to future generations because it “can ease the whole prenup conversation,” he says.
Setting up a stealth prenup is something to talk with your lawyer about, but here’s an overview of how it works: the cornerstone of these agreements is an irrevocable, fully discretionary trust, Parthemer says.
That means there are no automatic payments from the trust — how and when assets are distributed are entirely at the discretion of the trustee (a person, who can be a relative or a professional, who has been appointed to manage the trust). Since the beneficiary doesn’t have any entitlement to the funds in the trust, their creditors and/or spouse have no entitlement to the funds either.
“That creates an extra layer of protection from an ex-spouse trying to reach through and grab assets,” Parthemer says.
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