In the U.S., four out of ten marriages involve at least one person who has been married before. Second (or third) marriages come with unique challenges, mainly concerning finances and blended families. Estate planning for couples in second (or third!) marriages requires additional planning to protect your spouse and your family from unintended consequences, such as what happened to my clients Ray and Rachel:

Ray and Rachel both have adult children from prior marriages. When they married, they purchased a home, which was titled to them as “tenants by the entirety.” Both had sunk considerable money into the home, and Rachel’s intention was to use the home’s equity to provide inheritance for her children. Unfortunately, she passed away, and the home became Ray’s sole  property. It was never Ray’s intent to disinherit Rachel’s children, but he never got around to making any changes, and when he passed away a year later, his son inherited everything, and Rachel’s children got nothing.

If they had taken the time to meet with an experienced estate planning attorney, this would have a much happier ending. So, what are the steps you can take to avoid being Ray and Rachel?

 

Are You Already Married or Contemplating Marriage?

What’s your current marital status?  If you’re already married, you’ll probably need to update your estate plan. If you’re contemplating marriage, now is the time to plan ahead. Legal documents, such as living trusts, property deeds, wills and prenuptial agreements are tools estate planning attorneys use to ensure your wishes and intentions are carried out.

Prenuptial Agreements

If you have not yet walked down the aisle, consider creating a prenuptial agreement (“prenup”). This is a binding contract between you and your future spouse which spells out how your assets will be divided should the marriage end in divorce. This agreement can also be a crucial component of your estate plan.

A prenup can:

• Protect the assets you’re bringing into the marriage
• Clarify your intentions regarding the distribution of your assets
• Avoid potential legal challenges to your estate plan
• Impact spousal rights in the event of death or divorce

If you are already married, it is not too late to make arrangements. Consider a postnuptial agreement (needs a link), which serves a similar purpose to the prenup. A key aspect to creating a pre or post nuptial agreement is to fully disclose your assets and debts to the other party.

Full Disclosure of Assets

Transparency is key in estate planning for second marriages. Both spouses should fully disclose all assets, including:

• Real estate
• Investments
• Retirement accounts
• Business interests
• Debts and liabilities

This disclosure helps ensure fairness and prevents potential conflicts or surprises.

Clearly Define Your Wishes

It’s crucial to clearly articulate your wishes regarding asset distribution. Consider this:

• How you want to provide for your current spouse
• How you want to provide for children from previous relationships
• Any specific bequests or charitable donations you wish to make

Joint Living Trust vs. Separate Living Trusts

One of the most common instruments used in estate planning for married couples are living trusts. These trusts may be “joint,” meaning one trust is created for the couple, or each spouse may create their own separate trust.

Joint Living Trust

A joint trust are most suitable for couples when:

• Neither spouse has children from previous relationships
• Only one spouse has children
• Spouses have similar asset levels and financial goals

Joint trusts are generally simpler to administer and offer a lot of flexibility.

Separate Living Trusts

Separate trusts are often preferred in second marriages, especially when spouses have children from previous relationships or significant separate assets. The Benefits include:

• Greater asset protection
• Clearer separation of individual assets
• More control over asset distribution to children or other beneficiaries

Additional Considerations for 2nd Marriages and Estate Planning

1.Update Beneficiary Designations: Review and update beneficiary designations on life insurance policies, retirement accounts, and other assets

2.Consider a QTIP Trust: A Qualified Terminable Interest Property (QTIP) trust can provide for your spouse while ensuring your assets ultimately pass to your children

3.Plan for Blended Families: If you have stepchildren, decide whether and how you want to provide for them in your estate plan.

4.Review Regularly: Estate plans should be reviewed and updated regularly, especially after significant life events.

5.Seek Professional Advice: Given the complexities of estate planning for second marriages, it’s advisable to work with an experienced estate planning attorney and financial advisor

 

An Experienced Estate Planning Attorney Can Help

Remember, there’s no one-size-fits-all solution for estate planning in second marriages. The key is to communicate openly with your spouse, clearly define your wishes, and create a plan that fairly addresses the needs of all involved parties. So, whether you are contemplating another marriage, or you have already said “I do” once again, meeting with an experienced estate planning attorney to review your plan will prevent unnecessary heartache and frustration in the future.  Click below to schedule a free call with me.