Remarriage and Estate Planning
People who plan to remarry or who already are in a second marriage can face complex estate planning challenges. The individuals usually bring their own assets into the marriage. They may also have children from prior marriages whose inheritances they wish to protect. Sometimes the residence that one spouse owns is becomes the new marital home, presenting another potential complication.
Many “blended families” truly blend, but tension between adult stepchildren and a parent’s new spouse is not uncommon. Without good planning, the tensions worsen or emerge for the first time following the death of a parent. Some tensions erupt into lawsuits. If you are like most people, you probably want to promote family harmony, protect your children, and provide for your spouse if you are the first to pass away. Many of the planning techniques that work well in first marriages are inappropriate for remarriages.
Here’s a Sampling of What We Routinely Hear from Remarried Couples
What is my spouse entitled to if they outlive me?
In Pennsylvania, without a Will, the surviving spouse is entitled to one-half the deceased spouse’s probate estate. Probate assets are those assets titled to in a single person’s name that are not controlled by a beneficiary form or other transfer-on-death designation. Even if you have a Will or Trust, the surviving spouse is entitled to an “elective share” of a deceased spouse’s assets.
Can’t I just leave everything to my spouse, who I trust implicitly and who has promised to pass on whatever remains to my own children?
You can but it might not work out the way you hope for a variety of reasons. One might be that your spouse is unable (due to age, health, disability) or unwilling to revise their estate plan to effectuate your wishes. Perhaps they are no longer able to manage their assets and someone with power of attorney takes control and changes the “plan”. We do not recommend leaving your estate outright to your spouse without conditions as this will not guarantee that your assets will be distributed as you wish. Once your spouse inherits your assets, they are under no legal obligation to leave anything to your children. Even if your spouse truly intends to pass on your assets to your children, circumstances beyond their control may arise that prevent that from happening.
Your spouse may remarry, changing the dynamic entirely.
My spouse has a will that earmarks certain assets for my children. Isn’t that sufficient?
No, because a Will can be changed at any time, so long as the Will-maker is competent. There would be nothing to prevent your spouse from changing the Will and naming as beneficiary their own children, or even a new spouse. Moreover, a Will has no control over what your spouse can do during their lifetime with the assets that have been inherited from you.
Consider These Real-Life Situations
After you are gone, your spouse develops dementia and makes poor financial decisions, squandering the assets. Or your spouse’s children may be able to convince your spouse to make them joint owners or the sole beneficiary of the assets and to cut out your children. If your spouse’s children have a durable power of attorney for their parent, they then use their authority to take control of the assets, possibly diverting the assets to themselves.
One of your spouse’s children experiences financial difficulties. Being human, your spouse finds it difficult to say no, and gives that child some or all of the assets that were supposed to end up with your children.
If you become disabled, your spouse may end up being your caregiver for months, possibly even years. Following your passing, your spouse’s children may convince your spouse that keeping your assets is rightful payback for all that care.
What are the possible solutions?
• Update your estate planning documents. This is the most basic and necessary thing you should do. At a bare minimum, you should have a new Will, power of attorney and healthcare directive. We also highly recommend that you create a digital asset inventory and digital will.
• Consider a pre-nuptial agreement, or if you’ve already married, a post-nuptial agreement in which both of you waive your right to an elective share and other surviving spouse rights. This is important if your goal is to ensure that at some point, your individual savings are inherited by your children after you are both gone.
• If you have a 401k, 403(b), pension or IRA that you want your children to inherit, your spouse will need not only to sign a pre- or post-nuptial agreement, but also sign a waiver of their rights on the beneficiary forms associated with those accounts.
• Create a trust. When you pass away, your assets are held in trust for your spouse. Your spouse can draw on the income. If you wish, you can also include provisions that allow your spouse to access the principal for certain purposes. Anything that remains in the trust upon your spouse’s death then passes to your own children.
Is a Trust right for you? Watch one of our educational videos.
• Depending on your financial condition and your health, consider purchasing life insurance on your life, naming as beneficiary your spouse and/or your children from your first marriage, and leaving some of the proceeds to each. Another possibility if you purchase life insurance is to set up a trust for the insurance that will distribute a specific amount that you choose to your spouse for the balance of his/her life, with the remainder going to your children upon his/her death.
• Review your beneficiary designations. Assets that already have a named beneficiary may need to be updated if you’re remarrying.
• You should also consider other assets, such as bank accounts or real estate, should be titled. Adding your new spouse to your home as a joint tenant with right of survivorship may seem like the right move for keeping things simple in your estate plan. But doing so means that if something happens to you, your spouse will automatically assume full ownership of the home. They could then do with it as they wish, regardless of what you might have specified in a Will or trust.
Marriage is complicated. Second marriages are even more so, especially if each of you has children from prior relationships. The experienced estate planning and trust attorneys at Fiffik Law Group can answer your questions make suggestions and prepare all of the documents needed to achieve your estate plans. Contact us for a free consult today.