What is Fair in a Second Marriage and Estate Planning?
For many couples, estate planning in a first marriage can be stressful and difficult to plan out. However, in the event of a second marriage, the process becomes even more difficult. While in a first marriage both spouses generally have the same goals, a second marriage can produce differing goals on inheritances, financial planning, long-term care, and much more. Because of these factors, it is extremely important couples not only discuss their estate planning ideas with one another, but also use the services of an experienced and knowledgeable estate planning attorney when creating wills, trusts, or other legal documents pertaining to the estate planning process.
Children and Inheritances
In a second marriage scenario, one or both spouses will likely bring new children into the family. Whether the children are still minors or adults, deciding on inheritances can be tricky. Since both spouses likely bring different assets to the second marriage, such as property, bank accounts, retirement accounts, life insurance policies, and more, it is important to make specifications very clear as to how these assets will be divided up after one or both spouses are deceased. In most matters, each spouse will want to make sure certain assets go specifically to their children, while also ensuring the surviving spouse will have enough income to live on for many years.
Pre and Post-Nuptial Agreements
For many couples involved in second marriages, a pre or post-nuptial agreement is a crucial part of the relationship. Often put in place if one spouse has significantly more assets than the other, these agreements are seen as an excellent way to safeguard various assets should the marriage end in divorce. However, since these documents can contain many clauses and involve large amounts of money and other valuable assets, it is critical the documents be reviewed by an experienced estate planning attorney before they are signed. If either spouse fails to understand any part of the document, they should have it explained to them by their attorney in a clear, concise manner before signing.
Naming Beneficiaries
Considered one of the most common estate planning issues in second marriages, naming beneficiaries for life insurance policies, IRAs, and other income plans can be difficult to come to a decision on. While often easy to do with a first marriage, the second marriage scenario can bring with it the possibility of children or others being bypassed in the process. For example, a new spouse will have the ability to name anyone they please to be a new beneficiary. Even if promises are made along the way, after one spouse is deceased, those promises can be broken, leading to tremendous conflict and even legal issues.
Using a Trust as Beneficiary
To avoid potential conflict when a spouse dies, it is often wise to name a trust as beneficiary for life insurance policies and other tax-deferred income plans. By doing so, a spouse can maintain control over how and to whom assets and income are distributed. For example, a trust can be established to provide a spouse with lifetime income, yet also allow other assets to be distributed in another manner. By using a trust, protection can be granted from not only irresponsible spending, but also from creditors, divorce, and estate taxes.
Long-term Care Insurance
While not pleasant to think about, long-term care must be a part of the estate planning process in second marriages, especially if there is a large age gap between spouses. If long-term care in a nursing home or other facility is needed for a spouse, the couple’s combined assets will be in play to pay for that care, which can lead to financial difficulties or even bankruptcy. To guard against this, long-term care insurance can be purchased as a form of asset protection.
By working with a skilled estate planning attorney and discussing your goals with one another, most if not all potential estate planning issues can be worked out to everyone’s satisfaction.
