Editor's Note: This article is part of the Financial Advisor series "How I Solved It." Advisors describe a client with a problem and what they did to help.

About a year ago, a couple approached Sean Wilson, a senior director at TIAA in New York, with an inheritance conundrum. It was a second marriage for both of them and each had children from a previous marriage. She had a son, he had a son and daughter. All three children were grown and self-supporting.

"Their primary goal was enjoying a comfortable retirement and taking care of each other," recalled Wilson, who is in the product and portfolio solutions and distribution area of TIAA Wealth Management. "They made it clear that leaving a legacy for their adult children was secondary and should not infringe upon the primary goal."

Simple as that may sound, inheritance issues in blended families are rarely easy to solve.

"They went through the financial planning process with us, discussing their needs, wants and wishes," he said. "We discovered that the couple needed their combined assets to provide for their comfortable retirement."

But both spouses had a significant portion of their assets in retirement accounts, with each spouse's biological children listed as their respective beneficiaries. "If one of the spouses passed away and his or her retirement assets were distributed to his or her biological children, the other spouse would have to change lifestyles. That was not an acceptable option for them, so a solution was needed," said Wilson.

The challenge, he explained, was that if each client listed the spouse as the beneficiary of a retirement account, that may have been fine for the surviving spouse, but left no guarantee that the first spouse's children would ever inherit the assets. After all, those children were only step-children to the second spouse.

How should beneficiaries be set up in blended families to ensure that their legacy goals are met and all the children receive their due inheritance?

"We determined that it made the most sense for the couple to name each other as beneficiaries of their retirement plans ... and to put a life insurance policy in place on themselves with their biological children as beneficiary," said Wilson.

The first part of the plan guaranteed that if one died, the other would have sufficient assets to maintain a comfortable retirement, the couple's primary goal. "They also got to benefit from special tax treatment that some of the retirement accounts enjoyed," but which only applied to the owner and a designated spouse, not other beneficiaries, he added.

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