Clients in blended families are not paying enough attention to their estate plans, according to Christine Van Cauwenberghe, director, tax and estate planning, Investors Group, and are therefore potentially hurting their loved ones financially.

Van Cauwenberghe spoke at the 11th Annual Institute of Advanced Financial Planners (IAFP) Symposium in Ottawa on Friday.

“The make up of the Canadian family has evolved so much that we’re used to all these different types of families,” she said. “It’s kind of ironic that the people who have accepted the situation the most and consider their stepchildren to be kids … tend to be the ones who inadvertently disinherit that child the quickest.”

Stepchildren can often be overlooked in estate plans because they are not automatically covered in wills like biological children. The language in wills generally refers to assets being left to the “issue,” said Van Cauwenberghe, which is the natural or adopted child of a person. It does not include stepchildren, she said, which means if not properly phrased a basic will could disinherit a loved one the client had intended to provide for.

Another way stepchildren can be accidentally disinherited is when clients think they can make things simpler by designating a direct beneficiary instead of constructing an estate plan. For example, if a client names his or her spouse as the direct beneficiary, said Van Cauwenberghe, when the surviving spouse dies all of the assets pass on to his or her family and nothing goes to the children from the client’s previous relationship.

“The parents say, oh that won’t happen we intend to treat both sides of the family equally in the will,” she said. “You just made your will completely irrelevant because nothing is going through your estate.”

Even a properly constructed will, however, may not be enough to ensure children and stepchildren receive their inheritances as clients had intended. “If you’re the first spouse to die, and you leave everything to your spouse, you’ve basically lost control over it,” said Van Cauwenberghe. The danger is that in most provinces when a surviving spouse remarries any will created by the spouse and the client will be rendered void.

There are several options available for estate plans involving blended families, according to Van Cauwenberghe, such as spouse trusts, gifts upon death and insurance.

If a trust is deemed to be the best option, it’s important that clients see the right lawyers to make sure the vehicle is set up correctly, said Van Cauwenberghe. “Try to make sure [the lawyers] have their TEP designation,” she said, “that they’re a member of the Society of Trust and Estate Practitioners.”