Estate Planning In Second Marriage Situations

        

            Estate planning is critical in second marriage situations. Meeting or knowing people who are on their second or third marriage isn’t exactly uncommon nowadays. Many of us also know that remarriages entail a lot of adjustments and sometimes complications, especially when there are kids involved. Simply put, blending of two families together can be pretty challenging.

            With all the challenges and concerns on the surface of every remarriage, estate planning is often forgotten or set aside by many couples. But with the merging of two families, concerns and challenges about financial, legal and estate planning multiply.

            The following are some of the issues you should take note of, as explained by Mark Eghrari, and elder law attorney in Long Island, in his article Second Marriage And Estate Planning: 5 Things You May Not Have Considered:

Income and assets that are combined in second marriages may be at risk, if one of you still has financial issues and entanglements with a former spouse. Creditors may come for you to hold you liable of an old debt, as they “are not always bound by divorce settlements,” Mark said. To avoid complications, you may opt to keep you and your spouse’s money separate.

*If you are considering creating a joint trust, you may want to read one of my old blogs: Should I Create a Joint Trust? (Should We Have One Trust or Two?)

You also should understand the status of your properties after remarrying. Mark explains that in a community property state, those you receive before the marriage remain yours, while those you acquire after become co-owned by you and your spouse. On the other hand, “ownership is controlled by titles, registrations, or ownership documents” in a common law state. To help you decide on matters regarding these properties and in connection with your estate plan, you should see professional advice from a lawyer.

A Trust will sufficiently protect assets in case one of the spouses marries again after the other’s death. Protection for the separate assets of spouse’s children may be set up, as preferred.

Complications may happen if a Trust isn’t set up with specific wishes regarding the inheritance of the children. Do the children of the first spouse need to wait for the second spouse to die before they get their inheritance? Does the new spouse get to decide who will inherit the joint assets? All these should be explicitly stated in the Trust, to avoid unintentionally disinheriting your children from your previous marriage.

Whether the surviving spouse be allowed to stay in the home or not is a concern for blended families. What resolves this is again, putting the home in a Trust. According to Mark, many couples do that “for the benefit of the surviving spouse.”

With the different new adjustments in every remarriage, always consider to revise your estate plan (if you already have one) or seek legal advice to set it up. Remember that it isn’t an easy process—you may experience pitfalls in setting up your estate plan in a second marriage—but it is necessary step that no couples of remarriages should overlook.

           

Couples Face Pitfalls When Estate Planning In A Second Marriage

Attorney Stephen M. Worrall writes the following in his Georgia Wills, Trusts and Estate Planning Blog. This centers upon an issue that is constantly overlooked, creating drastic and unfortunate impact upon the estates of many people! Don't overlook the importance of planning in second marriage situations.

Our greatest challenge is planning the estate for second marriage clients. The blended family carries with it a number of competing concerns as we prepare wills and trusts to meet their needs.

If the couple is financially sound with adult children from their former marriages and have a prenuptial agreement, our task becomes fairly easy. The challenge comes with the scenario wherein the surviving spouse would need the assets from the first to die, yet the first to die would ultimately want for his or her children to inherit once the surviving spouse passes.

The problem with leaving all of the assets to the spouse is that the spouse is under no legal duty whatsoever to include the children of the deceased spouse in his or her will or trust. The children of the first to die become disgruntled when their relationship with their step-parent begins to fade for fear they will never inherit anything from their parent. Invariably they feel that their parent would never have intended the inevitable result.

By way of illustration, let's assume that Tom has two children from his previous marriage, Terri and Tim. His wife, Julie, has two children from her previous marriage, Jack and Jennifer. Should Tom's will leave his assets to Julie? What about Terri and Tim? What should Julie's will say? In such a scenario, there are several options.

We explain the options to our clients as spectrum ranging from complete control of the assets from the grave to little or no control. The first-to-die spouse can control the assets by giving the surviving spouse lifetime rights over the assets, but when the survivor dies, the remaining assets must pass to the children of the first to die. This can work well for those children, but the surviving spouse often is uncomfortable with the feeling of being controlled .

The other end of the spectrum would be to simply leave the assets to the surviving spouse and trust that the survivor would provide for the deceased spouse's children in his or her trust in the future. While this latter option sounds nice, often the relationship between the stepchildren and step-parent fades as years go by and the stepchildren are typically disinherited in the end.

We like to see a hybrid approach taken. First, using our example, we recommend that Tom's estate plan provides that Terri and Tim first be left some amount outright and then provide the remaining assets to Julie - some restricted and some not restricted. The assets typically not to restrict would be the marital residence and retirement assets.

Life insurance proceeds and other investment liquid assets could pass to a "QTIP" trust whereby Julie could withdraw funds from this trust for the rest of her lifetime, but at Julie's subsequent death, the remaining QTIP trust assets revert back to Terri and Tim. "QTIP" stands for Qualified Terminable Interest Property and was created by Congress in early 1980s.

Each and every case is different but perhaps some combination of the above should be considered when the difficult challenge of planning the estates of the blended marriage is encountered.

SOURCE: Naperville Sun in an article by Richard W. Kuhn