All In The Nontraditional Family

by Lindsay Guido

“There are as many kinds of love, as there are hearts”

               ― Leo Tolstoy, Anna Karenina

Nontraditional families represent a majority of American households, sharing in the same joys, challenges, traditions, and milestones as any other. But the law isn’t designed for a nontraditional setup, as there is no single plan suitable for the varied needs of a broad range of groups including: cohabitating couples, stepfamilies, adoptive families, single parents, and LGBTQ+ families.

A 20th Century nuclear family may have been defined as one with opposite-sex parents, married only once, who have one or more biological children under age 18 living at home. And although much of our social and cultural fabric is built around these more traditional family arrangements, it often fails to capture the richness and diversity of the human experience. While the term “nontraditional” may sound unflattering, it’s simply a catch-all for a miscellany of everything that’s not a nuclear family, and one that reflects life’s complex reality beyond that narrow definition.

Common in Literature and Life

Unique family groups are hardly new. Look no further than classic stories in literature.

In To Kill a Mockingbird, widowed father Atticus Finch had his hands full navigating a high-profile legal case and its moral lessons for his two children. Jean Valjean, protagonist of Les Misérables, struggled to lead a normal life as a fugitive and single father to his adopted child, Cosette. Charles Dickens favored themes of adoption with both Pip and Estella in Great Expectations and Oliver in Oliver Twist.

About 135,000 children are adopted in the US every year and, in one form or another, 30% of Americans have adoption within their immediate family.

For a history lesson on blended families and stepfamilies, Jane Austen’s Sense and Sensibility, set in 1790s England, began with the death of the Dashwood family patriarch leaving the family estate to the son of his first marriage, and little else for the second Mrs. Dashwood and her three daughters, who had to seek out a modest future with distant relatives.

These days more than 50% of U.S. families are remarried or recoupled and 1300 new stepfamilies form every day.

Vulnerabilities of Nontraditional Families

The U.S. has the world’s highest rate of single-parent households. Though two-parent households are still the most common, single-mother-only households have doubled and single-father-only households (though a historically smaller percentage) have quadrupled over the last 50 years. Cohabitation for couples also is on the rise.

Although nontraditional families are common, rules and laws involving financial matters are not always designed for them. Transferring property to an unmarried partner can be expensive because the tax reductions that married couples get do not apply. This also applies to estate benefits and financial gifts. Moreover, custody arrangements and multi-generational asset distribution can be more fraught for non-traditional families. Because unique family groups do not enjoy many of the implied, automatic protections and privileges as traditional families, they need a proactive approach to estate and financial planning.

Retirement Income

When it comes to IRAs where couples have named one another as beneficiary, marital status matters when the first passes away. Married couples are granted special tax treatment and can roll their spouse’s IRA into their own, deferring required minimum distributions. Upon the death of an unmarried partner, the surviving non-spouse beneficiary can only transfer the funds to an inherited IRA account, which they will be obligated to empty within in 10 years.

 Also, widows and widowers are entitled some or all of their spouse’s Social Security survivor benefits. This advantage is not available to unmarried couples who must plan to use other sources of funding.

Preparing a Plan

Conifer Bay Capital conducts annual client reviews to evaluate their exposures and risk factors. During that review, we collaborate with a client’s attorney or help clients identify attorneys with the expertise to match their unique circumstances. We also help with the crucial final step: implementing the legal advice, re-titling accounts, and updating beneficiary designations.

General/Legal Considerations

Members of any family structure need to consider their goals and priorities for the future, including support for partners, children, and themselves.

Crucial tools for many nontraditional arrangements include proper beneficiary designations on retirement accounts and life insurance (with adequate coverage), durable powers of attorney and health care proxies, and the establishment of an estate plan. Families with minor children also must consider guardianship and college funding.

Trusts are an important tool and a traditional testamentary will may not be enough to ensure that your wishes are carried out. Especially for nontraditional families, tools for effective estate planning include:

  • Property in a living trust

  • Life insurance proceeds

  • Retirement accounts such as IRAs and 401(k)s

  • Investment securities held in a Transfer On Death (TOD) account

  • Real estate held by a TOD deed

  • Payable On Death (POD) bank accounts

  • And property owned with someone else in joint tenancy or tenancy by the entirety (Note: Beware of gift tax complications when it comes to property retitling).

Divorced/Single Parents  A sole provider needs adequate life and disability insurance. Life insurance can be used in estate planning to provide an equal inheritance among multiple children or heirs, especially if the estate includes non-liquid assets (houses, cars, etc.). Beneficiary planning and clear guardianship decisions are critical, particularly in families with minor children. In addition, retirement income planning is more important for individuals who do not have a spouse to assist them financially in retirement.

For a sole provider, some of these strategies may seem superfluous. In all actuality, these decisions are even more important for someone with sole custody of minor children.

Blended Families/Stepfamilies  In blended families, there are often dual interests for both the spouse from a subsequent marriage and the children of a first marriage. A prenuptial agreement can be essential, particularly when children from prior unions are involved.

In cases of large estates, careful consideration is needed to plan for liquidity of assets at death. Those who plan to remarry may want to consider involving a Qualified Terminable Interest Property (QTIP) trust to provide for children from an earlier marriage, which allows each partner’s assets to go to a specific designated beneficiary (such as children from a previous marriage). As with unmarried couples, it is important to review legal documents such as durable powers of attorney, health-care directives, and guardianship plans for minor children. Estate plans should be reviewed and updated every three to five years or following a major life event such as marriage, the death of a family member, or the birth of a child.

Unmarried Partners  Automatic protections and privileges do not exist for unmarried couples, which makes legal documents and asset ownership decisions even more essential. These include health-care proxies/directives, durable powers of attorney, wills, and trusts.

Life Insurance: Adequate life insurance is important for a dependent partner and an irrevocable life insurance trust (ILIT) can be helpful because the unlimited marital deduction for estate tax purposes does not apply. For large estates, it is key to plan for liquidity upon a partner’s death and be aware of potential taxes on the transfer of assets (such as adding a partner to a real estate deed).

Taxes and Trusts: For tax savings, it can be very useful to strategically plan who gets to claim certain deductions and whether to shift taxable assets to the partner in the lower tax bracket. It also is helpful to establish a separate paper trail between partners to record each partner’s cost basis on property.

Revocable trusts may provide a “cleaner” method of transferring assets at death because simple wills can be challenged by other family members during the probate process. Consider establishing a Domestic Partnership Agreement. This agreement can specify division of assets in the absence of legal divorce proceedings and Qualified Domestic Relations Orders (QDROs) for splitting retirement plan assets.


As we can see from our classic literary heroes, families have always come in many shapes and sizes, with equally varied experiences.

Having a non-traditional family means planning differently, and extra care must be taken to protect unmarried partners, stepchildren, and extended family members to ensure financial and estate goals are carried out.

It is important to be open and honest in this process. Though addressing these issues may seem daunting, its reward is the peace of mind that ultimately allows families to thrive and create a secure and happy future, no shared genetics required.

What Can Estate Attorneys Safeguard?

  • Family home ownership

  • Custody of a family’s minor children

  • A surviving partner’s right to manage family finances and minor children

  • Rights to make medical decisions for partners and minor children

  • Rights to make financial decisions for an incapacitated partner

  • Ensuring state probate laws don’t override a family’s wishes regarding inheritance

  • Correctly designating beneficiaries on life insurance and other policies

  • Minimizing the impact of estate and income taxes on a surviving partner

  • Planning for and minimizing will contests by other family members

  • Allowing a surviving partner to make burial and related decisions, not blood relatives

March 31, 2022

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