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 their children. Each spouse probably has
assets they brought into this marriage, and they will want those to go to their
own children after they die. At the same time, they will probably want to make
sure the surviving spouse will have enough to live on.
More than likely, estate planning methods relied upon in the
first marriage will not work now. For example, let’s say the husband adds the
new wife’s name on the title of his home and they own it as joint tenants with
right of survivorship. If he dies first, his share will immediately transfer to
his wife, who now has complete ownership of his home. She can do whatever she
wants with it now, regardless of what his will or trust says. She can leave it
to her own children and completely disinherit his.
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 the spouse-beneficiary can
name anyone he/she wants as new beneficiaries or to inherit the proceeds,
bypassing the owner’s children. Promises may be made now to include them, but
promises can be broken after one spouse is gone.
Other Considerations:
* If each has considerable assets, it may be
wise keep the assets and estate planning separate. If there will be a pre- or
post-nuptial agreement, it should be reviewed by an estate planning attorney
(before signing).
* If one spouse has considerably fewer assets
than the other, it is possible to provide for this spouse until death or
remarriage, then have the remaining assets distributed to the children of the
“wealthier” spouse. This is often accomplished through a life estate or QTIP
trust.
* If the new spouse is much younger, the
children of the older spouse may be concerned that the new spouse is only after
the money. These feelings may subside as the marriage lengthens. But if the
younger spouse is closer in age to the children, they may be wondering if they
will ever receive their inheritance. Consider distributing some of their
inheritance upon their parent’s death, then the rest at the surviving spouse’s
death or remarriage.
* Naming a trust as beneficiary for life
insurance policies and tax-deferred plans is often a good choice for second
marriages. This will allow the owner-spouse to keep control over how and to
whom the proceeds are distributed. The surviving spouse can receive lifetime
income, yet the owner-spouse can keep control (through the trust) 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.
* It is a good idea for the couple to discuss
their individual estate planning goals together. If they are similar, then the
task may be somewhat easy. But if they are considerably different, separate
attorneys may be needed.
Your clients will want to do the right thing for everyone
involved: themselves, their spouse, their children, and their spouse’s
children. Help them take the time to consider this from everyone’s point of
view.
