Entering into a second marriage after a divorce or the death of your first spouse can feel like a new beginning. However, it’s essential to consider how combining your life with someone else’s may affect your financial strategy, including estate management. Determining what is equitable for your estate plan in a second marriage can be challenging, especially if you or your new spouse have children from previous marriages, or if you plan to have children together in the future. Familiarizing yourself with the significant financial issues related to a second marriage can assist you in reshaping your estate plan. Consulting with an estate attorney, particularly one with expertise in this area, can also be beneficial.
Factors to Consider in Estate Planning for Second Marriages
Estate planning for a second marriage requires careful consideration of a variety of factors. Both partners should be aware of the essential issues when creating or updating their individual estate plans, or when developing a new joint one. Here are some of the most important questions to ask:
- What assets will each of your children inherit?
- Do you plan to have additional children together, and if so, what assets will be preserved for them?
- Which assets will each of you retain individually?
- Will any assets be retitled in both of your names, such as a primary residence, vacation home, or bank accounts?
- Are either of you bringing any debts into the marriage, or will you incur new debts after the marriage?
- Do each of you have a will in place that requires updating, or will you establish a new joint will?
- What other estate planning tools may be necessary, such as a trust, advance healthcare directive, or power of attorney, besides a will?
- Are you each willing to place restrictions on the surviving spouse in regards to assets held in your trust in order to protect your wishes?
- Will you continue working with your current financial advisors or choose a new advisor to help you manage your financial plan together?
Asking these kinds of questions can help both partners understand each other’s perspectives on estate planning. It’s advisable to have these discussions before the marriage takes place to minimize potential conflicts later. It may also be necessary to consider a prenuptial agreement to safeguard individual financial interests. If you’ve already remarried, it’s still a good idea to have these conversations sooner rather than later.
It’s beneficial to complete an inventory of your assets and liabilities, enabling both partners to know what they’re bringing into the marriage. This can aid in managing the distribution side of the estate plan in the future, as well as planning how to handle any debts if one partner passes away.
Estate Planning Considerations for Second Marriages with Children from Previous Relationships
Remarrying with children from a previous relationship can complicate estate planning efforts. There may be questions over who will inherit certain assets, and who will assume control over assets on behalf of minor children should one of you pass away. Here are some considerations to keep in mind when estate planning for second marriages with children:
- Review any provisions you’ve already made for your children in a will or trust, and how this may affect any assets your new spouse stands to inherit.
- Consider updating your will or establishing a separate marital trust to ensure your new spouse receives the share of your assets you wish them to have, while still preserving your children’s inheritance.
- If you plan to have children with your new spouse, make provisions for them as well.
- Factor in the age of your children when deciding what’s fair in estate planning. For instance, gifting some of their inheritance to adult children during your lifetime may make sense, while provisions for managing a minor child’s inheritance should be made in case of a premature death.
- Discuss and agree on how to handle any conflicting interests between children from previous relationships and new children.
By addressing these concerns and discussing them openly with your spouse and children, you can create an estate plan that takes everyone’s interests into account. Consulting an experienced estate planning attorney can also be beneficial in navigating the intricacies of estate planning for blended families.
Importance of Reviewing Your Beneficiary Designations
Assets that have named beneficiaries can complicate estate planning in the event of a remarriage. To avoid any issues, it’s important to review and update your beneficiary designations as necessary. Here are a few things to consider:
- Check all assets that have named beneficiaries, such as retirement accounts, life insurance policies, and investment accounts. Update beneficiaries to your new spouse or a trust you’ve set up, if applicable, to ensure your former spouse doesn’t receive the benefits.
- Consider how your bank accounts and real estate are titled. While adding your new spouse as a joint tenant with right of survivorship might seem like an easy solution, doing so means they automatically assume full ownership of the asset if something happens to you. This could conflict with any instructions in your will or trust. This also commingles the asset, which can be devastating if you actually intended to keep it separate property.
- Keep in mind that beneficiary designations supersede any instructions in your will or trust, so it’s crucial to keep them up to date. Failure to do so could result in unintended consequences for your estate plan.
Assessing Weaknesses in Your Estate Plan
To avoid any potential gaps in your estate planning during a second marriage, it’s important to identify areas that need attention. Without a will, your assets may not go to your desired heirs, making it essential to have one in place to ensure your wishes are carried out. Consider setting up a trust if either of you brings substantial assets to the marriage, to minimize potential conflicts over asset distribution. A trust attorney can help determine whether a trust is necessary and which type of trust to set up.
Life insurance coverage is also important to consider. Both spouses in a second marriage may need coverage, especially if one is the primary breadwinner and the other the primary caregiver for children. Checking your existing policies and talking to your insurance agent can help determine if you need more coverage to ensure your surviving spouse and children are financially provided for.
End-of-life planning is also critical. Long-term care insurance can help pay for nursing home costs, preventing a financial burden on your spouse or children. An advance healthcare directive and power of attorney can ensure that your wishes are honored in end-of-life situations where you are unable to make financial or medical care decisions. By addressing these gaps, you can ensure your estate plan is comprehensive and covers all potential issues.
Tips for Estate Planning
There are several tips that you should keep in mind when it comes to estate planning, just a few include:
- Consider speaking with an estate attorney to understand the implications of a second marriage on your financial plan.
- You and your spouse may choose to maintain your current advisors or find a new advisor to work with together.
- Trusts can be a useful estate planning tool for couples, including those who are getting married for a second time.
- A marital trust, for example, goes into effect when the first spouse dies, and can be helpful for passing assets on to a surviving spouse while minimizing estate taxes (when structured properly).
- Starting the conversation early is important when it comes to estate planning in a second marriage.
- Understanding the challenges involved in estate planning for a second marriage can help create a satisfactory plan.
- It’s important to communicate with adult children about how a second marriage can affect their inheritance.
If you’re ready to start estate planning for a second marriage, get in touch with us! We are always happy to walk you through these important steps.