May 9, 2012   Estate Planning

Estate Planning for Second Marriages

In first marriages, the couple generally has the same goals when it comes to their estate planning: take care of the surviving spouse for as long as he or she lives, then whatever is left will go to the children. They may own many of their assets jointly and, at the death of the first spouse, more than likely everything will go to the surviving spouse just as they had planned.
But second marriages (after divorce or death of the first spouse) are different. There may be his children, her children and sometimes our children. Each of you probably has assets that you brought into this marriage, and you want those to go to your own children after you die. At the same time, you probably want to make sure your surviving spouse will have enough to live on should you die first.
More than likely, the estate planning methods you relied upon in your first marriage will not work now. For example, let’s say you add your new wife’s name on the title of your home and you own it as joint tenants with right of survivorship. If you die first, your share immediately transfers to your wife, who now has complete ownership of your home. She can do whatever she wants with it now, regardless of what your will or trust says. She can leave it to her own children and completely disinherit yours.
There are similar problems with beneficiary designations. Many people name their spouse as beneficiary of their life insurance, IRAs and other tax-deferred plans to provide for their spouse should they die first. But this can be a problem with second marriages because your spouse-beneficiary can name anyone he/she wants as new beneficiaries to inherit the proceeds, bypassing your children. Promises may be made now to include them, but promises can be broken after you are gone.
Other Considerations:
  • If each of you has considerable assets, you may want to keep your assets and your estate planning separate. If there will be a pre- or post-nuptial agreement, be sure to have it reviewed by your estate planning attorney (before signing).
  • If your spouse has considerably fewer assets than you do, you can provide for him/her until death or remarriage, then have the remaining assets distributed to your children. This is often accomplished through a life estate or what is referred to as a QTIP trust.
  • If your new spouse is much younger than you are, your children may be concerned that he/she is only after your money. These feelings may subside as the marriage lengthens. But if your spouse is closer in age to your children than to you, they may be wondering if they will ever receive their inheritance from you. Consider giving them some of their inheritance upon your death (e.g., though life insurance), then the rest at your spouse’s death or remarriage.
  • Naming a trust as beneficiary for your life insurance policies and tax-deferred plans is often a good choice for second marriages. This will allow you to keep control over how and to whom the proceeds are distributed. You can provide your spouse with lifetime income, yet keep control over the rest of the proceeds. Keeping the proceeds in a trust will also protect them from irresponsible spending, creditors, predators, divorce, remarriage and even estate taxes, if done properly.
  • Be sure to include planning for disability and long-term care. If one spouse becomes ill and Medicaid assistance is needed, the combined assets of the couple will be considered “available assets” to pay for the care of the ill spouse. Long-term care insurance may be needed to protect the assets of one or both spouses.
  • Discuss your individual estate planning goals together. If they are similar, then your task may be somewhat easy. But if they are considerably different, consider having separate attorneys.
You want to do the right thing for everyone involved: yourself, your spouse, your children, your spouse’s children. Take the time to consider this from everyone’s point of view. An experienced estate planning attorney will be able to advise you and work with both of you to create a plan that will do exactly what you want it to do. 
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