Estate Planning for the Modern Family


How can today’s American families protect their wealth and the financial future of their loved ones?

With the rise of same-sex couples, cohabiting couples and blended families, the dynamics of the American family are changing. U.S. law, however, has not kept pace with the evolution of the family unit.

“The financial industry has a lot of growing to do in this area, as do our laws. They account for traditional nuclear families separated by distinct generational splits, and increasingly, that’s not the case,” says Hugh Magill, Northern Trust’s chief fiduciary officer and global director of Trust Services in Chicago.

Once narrowly defined as a married mother and father with children, the “traditional family” now constitutes a declining percentage of the population. Recent data from a 2015 Census Bureau report revealed that 16.5 percent of men and 17.7 percent of women who have ever married have done so at least twice. And, according to the Pew Research Center, in 1960, 73 percent of all children were living in a family with two married parents in their first marriage. But by 2015, that number had fallen to 46 percent.

“The marriage paradigm is changing,” says Magill. “In previous generations, marriage was a cornerstone: Couples dated, got married, lived together, then had children. Today, couples may build a life together before they marry, making marriage a capstone experience.”

So, until legislation catches up with today’s culture, modern families need to take precautions when planning their estate and wealth transfer strategies to protect their wealth and the financial future of their loved ones. With the growing number of Americans entering into remarriage and cohabitation, thoughtful planning is increasingly important to ensure your wishes are understood and fulfilled.


Anyone with a significant amount of assets should enter into a prenuptial agreement before marrying, Magill says. That is especially true for people contemplating a second or third marriage. Not only does a prenuptial agreement protect each party if the marriage ends in divorce, it also acts as a pre-estate planning exercise.

With the assistance of individual legal counsel, couples prepare for the creation of a prenuptial agreement by disclosing their assets, liabilities, and sources of income. In addition to lifetime responsibilities, the agreement should also address the rights of each member in the event of a divorce or death. Equipped with this information, couples can then modify their estate and wealth transfer plans.

“A prenuptial agreement will define expectations and rights in the event of divorce or death, but also precipitates a larger estate-planning discussion,” Magill says. “It presents an opportunity to discuss your intentions and how wealth may be shared.”

Blended families/stepchildren

Aside from the assets each person brings to the table, a second or third marriage may also involve other family members, most notably children from previous marriages, as well as children born to the new couple. A revised estate plan should address how to handle any obligations from a previous relationship, such as child support or alimony. When revising any estate plan, asset registrations and beneficiary designations should be reviewed. In blended families, inheritance rights of each family member should be reviewed as well.

As family structures become more complex, estate planning also becomes more complex. This is due in part to the increasing diversity of family structures, as well as the size of the family and inheritance expectations of its members. Every estate plan should address legally enforceable obligations (such as alimony or child support) and then balance expectations of surviving spouses, children of any relationship (whole or half blood and step) and other family members.

A traditional estate plan often provides first for the surviving spouse, and then for the next generation. But with today’s blended families, many of which include older children and younger spouses, what happens to the estate in the event of your death? Will the children from a previous relationship need to wait for your new spouse to die before inheriting? A revised estate plan should address the timing of wealth transfers for all your beneficiaries.

Cohabiting couples

When it comes to unmarried, cohabiting couples, current property and inheritance law does very little to protect them, so they must make an extra effort to protect themselves.

To do so, cohabiting couples should retain separate counsel and consider entering into a contract, similar to a prenuptial agreement, which discloses assets, liabilities and income sources, defines lifetime financial responsibilities, and addresses inheritance. Each individual should then prepare estate planning documents consistent with their agreement, including powers of attorney for healthcare and property law.

Start the conversation now, not later

Any time there is a change in the following — family circumstances, goals, domicile, financial wealth, tax law — your estate plan should be reviewed. Ideally, the estate planning process should not start with lists of assets and balance sheets, Magill says. It should begin with a broader, values-based conversation about the role financial wealth will play in contributing to the well-being of family members. These conversations often seem daunting, particularly for blended families, but they can establish a vital foundation of understanding upon which a thoughtful estate plan can be built.

“As the family gets more complex, the solutions become more complex as well,” Magill says. “But one of the most important gifts we can leave behind is a thoughtful and carefully designed estate plan.”