Just as second and subsequent marriages are more complex, estate planning for second and subsequent marriages is also far more complex than first marriages. How do you protect your spouse and your children at the same time? Can you provide for everyone comfortably? How do you make sure that wealth is transferred to your children and not your spouses’ next spouse, if you should pass first? And how do you keep everyone’s feelings from being hurt? Start by taking an inventory of everything that you own, from high to low value. Ask your spouse to do the same. Compare notes – who do you want to get the collectible car, who should get the artwork, and who should get title to the vacation home? The most important part of this exercise is to start a conversation about the things you own, the people you love and how you would like your possessions to be distributed. Consider two scenarios – if you die first, or if your spouse dies first.
Anytime a blended family includes children from prior marriages, estate planning becomes more challenging, as reported in The Meridian Star, in “Estate planning after a second marriage.” If there are young children, how can you ensure that the surviving spouse will take care of them? And what if you pass away and your surviving spouse remarries? One way to prepare for this possibility is to make a child the primary beneficiary of a life insurance policy, place certain property under joint ownership with the child or set up a trust for your children. But none of these steps are simple, and all require the hard conversation with your spouse and with an experienced estate planning attorney.
If you have a written a will, it may require an update. Be extremely specific about which heir gets what and state bequests convincingly. The more convincing your bequest, the less ambiguity and the fewer issues that will arise. Also, update your beneficiary designations for retirement plans, investment accounts, and insurance policies. However, if you’ve been divorced, you may be precluded from changing beneficiaries in certain cases. Talk to a qualified estate planning lawyer. Take a copy of your divorcee decree with you and ask if revising your beneficiary designations will violate it.
You can also take a look at irrevocable trusts, which can be used to provide for your spouse and your kids. Some people establish a separate property trust to provide for their spouse after their death and designate their real property to their children. Parents can also create irrevocable trusts to direct assets to particular children. These can be great estate planning vehicles because: (i) a trust agreement isn’t a public document; (ii) assets within irrevocable trusts are shielded from creditors and from inheritance claims of spouses of the adult children named as heirs; and (iii) an irrevocable trust represents a “finalized” estate planning decision—which guarantees that particular assets transfer to a parent’s biological children. In addition, irrevocable trusts are rarely undone.
Pre-nuptial agreements can also play a role in estate planning, as they let you to designate personal assets for existing rather than future children. Post-nuptial agreements(similar to pre-nups, but drafted after a marriage) can also do this, but some states don’t recognize these types of agreements, and sometimes this is up to a judge.
Be sure to consult with an experienced estate planning attorney. Estates with this level of complexity require professional legal assistance from those with a thorough understanding of estate planning and tax issues.
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Reference: The Meridian Star (September 27, 2015) “Estate planning after a second marriage”