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Estate Planning in Second Marriages

Estate planning isn’t something most of us would choose to do with our time. It’s a tad morbid and can become quite complicated. Then, if you add in a second marriage, you’re looking at a whole host of other items to consider.

Fortunately, I recently sat down with Steven Adler of Steven M. Adler PLLC, to discuss some of the most important things for you to know when it comes to estate planning following a second marriage.

To give you some insight, if you’re in a second marriage or second relationship, here are some of the key highlights of our discussion.

The Most Common Mistakes 

Things can get more complicated following a second marriage because there are more vested interests in an estate.

For instance, you’re going to want to properly protect your children from previous marriages. Whether that’s the case for one side or both, it will be a crucial factor to your estate planning.

Secondly, you’re going to be combining more assets. In most instances, one spouse brings more assets to the marriage than the other. Since there are no guarantees of who will pass away first, your estate needs to clearly define what happens after the first or second spouse dies in order for your assets to reach the children they’re intended for.

Newlywed Estate Planning 

When you enter into marital bliss for the second time around, you may or may not be thinking about your estate (depending on how your previous marriage ended). However, it’s important for you to sit down and discuss your assets so that there is a clear understanding of what assets are necessary for the surviving spouse, and what assets you have to leave to your respective children.

The foundation of any estate is a will, power of attorney, health care proxy, and living will. In some cases following this conversation, you may find you’re both bringing similar assets to the relationship, your blended family gets along well, and you’re of similar age. So things could progress in a very similar fashion to a first marriage where when one spouse goes, the surviving spouse receives everything, and upon their death all the assets would go to the children and be split equally and fairly.

Another conversation you’re going to want to have is what obligations you may have to your former spouse or obligations to your existing children. You’ll also need to have a clear understanding of who holds the titles of your accounts, who holds what policies, who the beneficiaries are, and what your retirement plans look like.

The Benefits of a Trust

A trust is one of the key elements of the “best second marriage estate planning” solution. Whether it’s an irrevocable or revocable trust, a trust will ensure that after one spouse dies their assets or a portion of their assets are protected for the children of the spouse that has passed away.

This means that the surviving spouse can’t take that money, or gift it to one of their surviving children (a trust would have solved a lot of Cinderella’s problems).

You can develop trusts in one of two ways. If you decide to create revocable trusts, you and your second spouse can make alterations to this trust while you’re both living. Once one partner passes away, the trust becomes irrevocable so that the surviving spouse cannot change or affect the terms of the trust that were laid out prior to the first spouse's death.

There is also the option to create an irrevocable trust from the get go. Either way, once one partner dies, the trust is what it is and cannot be altered.

A Will vs. a Beneficiary

To put it simply, a will controls those assets which are solely owned by the deceased. So the home you jointly own, joint accounts, or life insurance policy, all of these would have a beneficiary. These assets will pass by operation of law to the joint owner or the beneficiary. 

A will does not trump a named beneficiary. 

While there is protection in New York State (a prior spouse following divorce cannot be the beneficiary of insurance or retirement funds) it’s still important that you update these documents so your estate can be executed smoothly.

What About a Prenuptial Agreement?

In some instances, one spouse brings significantly more assets to a second marriage, which may be an ideal opportunity to create a prenuptial agreement. However, prenuptial agreements only cover what happens after divorce. A proper estate plan will still need to be created, but a prenuptial agreement can help guide your attorneys in the right direction to see what concerns are and how to deal with them. 

Like many legal situations, there is no cookie cutter solution to estate planning. However, with a few tips and conversation starters from Steven, and a lawyer who’s asking the right questions, you and your new spouse should be able to create a lasting estate plan that benefits everyone involved. 

If you’d like more information on estate planning for your second marriage, or perhaps just your first, be sure to check out the Law Offices of Steven M. Adler, PLLC or reach out to Steven at 516.740.1184

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Larry Heller, Not Your Average Advisor.

 

A CFP® (Certified Financial Planner) and a former CPA.

Has helped solve complex financial planning for 20+ yrs.

Member of Wealth Management Think Tank.

A financial advisor think tank that meets monthly to discuss investment strategies and planning opportunities.

Larry is approached regularly by the respected journals.

“Journal of Financial Planning”, and “The Wall Street Journal”.