(item online) -- Editor's Note: The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.
There are a number of considerations when creating an estate plan. Even the most carefully created estate plan will need adjustments as life changes and alters the meaning or intent of the original plan.
A second or subsequent marriage is a prime example.
Introducing new people into the family will likely require a reshuffling of resources and authority, especially as applied to estate planning. Providing for the new spouse and children from one or both marriages will be important, but there may be potential conflicts that should be addressed early on to reduce the likelihood of protracted litigation when the remarried spouse dies.
In this week’s column, I will discuss estate planning in a second marriage. With thoughtful planning and by being clear and explicit about your wishes, you can avoid many of the potential pitfalls that come with a second marriage and a blended family.
The first step in reevaluating estate plans after second marriage is to take stock of the family situation generally.
For example, the second marriage may involve his children, her children and their children.
Depending on the circumstances, some family members need more support due to age or disability. It is also important to assess potential continuing obligations to a former spouse (under the terms of a divorce settlement) that could limit options for supporting new family members. It may be prudent to review the beneficiary designations on life insurance policies, retirement accounts, etc., and powers of attorney to determine who is appointed to make financial and/or healthcare decisions. The purpose of this review is to ensure the existing estate plan accounts for differing priorities related to stepchildren, adult children, young children, and new spouses.
In the happiness that surrounds a new marriage, updating estate plans is easy to overlook. People tend to address this issue once and fail to review how things are arranged until the very end, which can be problematic.
Without updates, spouses and children from the second marriage may receive very little or nothing. Also, each spouse often brings different assets, different life experiences, and may have different goals when it comes to estate planning.
By discussing these matters openly, with the assistance of a skilled estate planning attorney, you and your new spouse can craft an estate plan that meets the needs of you and your blended family, and clearly expresses your intentions through your estate planning documents.
Consider the following scenario:
Jack and Jill are married with three children. Jack passes away at an early age. Jill meets and marries John. Jill and John create a new estate plan that leaves their assets to each other at death, and then to Jill’s children.
Jill and John later have two children together.
Jill tragically dies, and all of the couple’s assets go to John. John marries Jamie and writes a new will after Jill’s death. John’s new will leaves all of his assets to his new wife, and the children he had with Jill.
What about Jill’s children with Jack? They have been disinherited and receive nothing.
There are several ways this situation could have been avoided.
When Jill created a new estate plan with her second husband, John, she could have taken steps to ensure that her children from her first marriage received some of her assets at her death.
She could have given specific assets to her children in her will; she could have designated them as beneficiaries on a life insurance policy, or she could have created a trust that would benefit her first three children she had with her first spouse Jack.
Additionally, not updating beneficiary designations for an insurance policy, retirement account, or investment account is a common problem and can leave the second spouse with little means of support, while a prior spouse or adult children from the earlier marriage (who do not need the money) receive the proceeds.
Before meeting with an estate planning attorney it’s important that you and your spouse talk about your goals, how you want to provide for one another, and the extent to which you want to leave assets to each of your children.
Consider any financial obligations either of you has to a prior spouse, as well as the extent to which you wish to leave any part of your estate to children from a prior marriage.
An estate planning attorney can review any estate planning documents from a prior marriage, including Wills, trusts, and beneficiary designations.
Then help you create new documents for your current situation.
