Estate Planning and Second Marriages
The rate of second marriages has been growing in the United States for several decades. Approximately 42 million adults have been married more than once and four in ten new marriages in 2013 included at least one previous marriage for one or both of the partners.
The challenges of blended families can be difficult for some couples; however, millions are making it work each day in America. If you are in a second marriage, your estate planning becomes even more important as you deal with issues of his, hers, and ours.
Estate Planning Goals Often Change in a Second Marriage
When a couple marries for the first time, their estate planning goals are usually identical – provide for my spouse and my children in the event of my death. A couple’s wills usually are mirror images of each other with the exception of changing the terms “husband” and “wife.” A simple will for a couple leaves everything to the surviving spouse and, if the couple dies together or one spouse predeceases the other spouse, everything is left to the couple’s children.
In a second marriage, estate planning is not always so simple. You may have children from a previous marriage and children from your current marriage. Depending on your age, you may also have grandchildren from your previous marriage. Deciding how you distribute your property can be a bit tricky. Obviously, you want to ensure that your surviving spouse has sufficient income and assets to live on after your death; however, you must also consider your children.
Another concern is what happens to the property once both of you are gone. Is it fair to your wife’s children from a previous marriage that your children from a previous marriage receive all of the property because their mother died leaving all of her estate to you and, in turn, when you die your estate goes to your children? Careful estate planning can avoid hurt feelings and years of probate litigation after your death.
Prenuptial Agreements in Second Marriages
Most people do not consider a prenuptial agreement as an estate planning tool; however, in second marriages, these agreements can avoid conflict during the probate process. For many couples entering a second marriage, both parties are bringing assets into the marriage they accumulated prior to meeting each other. A prenuptial agreement can direct that these assets remain non-marital assets and direct how these assets are to be distributed upon death.
A prenuptial agreement can avoid problems when the wills of spouses do not mirror each other. As discussed above, if both spouses do not have the same estate planning goals and their wills are different, it sets up a situation where the order of death determines whose goals are ultimately realized. A prenuptial agreement removes this “race to the grave” situation where the order of death decides whose heirs benefit the most.
Beneficiary Designations, Joint Tenants with Right of Survivorship (JTWROS) Designations, and Second Marriages
Beneficiary designations are another way that parties in a second marriage can avoid probate problems. Life insurance policies, retirement accounts, and other financial accounts that require a beneficiary designation can be used to leave property to your children from a previous marriage. These assets pass directly to the named beneficiary, outside of your probate estate, avoiding any arguments or issues regarding your intention for the distribution of this asset.
Joint Tenants with Right of Survivorship (JTWROS) designations can also be used to pass financial accounts directly to an heir. Many couples who remarry later in life keep separate checking and other financial accounts rather than combining their income and finances. By adding your child’s name to your financial accounts as a JTWROS, those accounts pass directly to your child upon your death thereby avoiding your probate estate.
Qualified Terminable Interest Property (QTIP) Trust
A QTIP Trust provides for your surviving spouse during his or her natural life or until he or she remarries. At that time, the trust terminates and disburses the assets to the beneficiaries of the trust (i.e. your children from a previous marriage). This is a way to provide for your spouse while also protecting your assets for your children. An added benefit of a QTIP Trust is the possibility of deferring estate tax and/or generating tax savings for your heirs.
Healthcare Powers of Attorney and Living Wills
Designating a person to make decisions about your medical care if you are unable to do so is extremely important for anyone but especially for spouses in a second marriage. Adult children may be very hurt and threatened if they believe your new spouse has ultimate decision-making power to end your life by withholding life-prolonging medical treatment. This is a sensitive issue that you need to discuss and resolve with your new spouse before you put your directives in writing and discuss the issue with your children.
Consult an Estate Planning Attorney
As blended families continue to increase, the need for proper estate planning in a second marriage becomes more important. In addition to the above options, there are many estate planning tools available to provide for your new spouse and your blended family. An estate planning attorney can help you establish your goals and devise an estate planning strategy that meets each of those goals.