Estate Planning For Second Marriages
Second marriages after the death or divorce of your first spouse can be challenging. You’ll have to consider how coming together with someone else can alter your financial plans and how you’ll manage your estate. In addition, you may wonder what is fair when estate planning for second marriages which is difficult to answer, especially if you are bringing children into the marriage or planning on having children of your own.
Key Considerations When Estate Planning for Second Marriages
Getting married for a second time brings up a lot of big questions about estate planning. You and your new spouse should know the significant estate planning issues before you begin to update or create an estate plan.
Some major questions to discuss with your new spouse for estate planning in a second marriage are:
- What assets will you be leaving to each of your children?
- Will you have additional children together?
- If so, what assets will you be leaving for them?
- Will you continue to hold assets individually?
- Will you retitle any assets into both of your names?
- Are either of you bringing any debt into your marriage, or will you incur new debt together?
- Do either of you have a Will that needs to be updated, or will you create a new Will?
- What other estate planning documents may be necessary for the marriage?
Discussing these questions together will help you understand each other’s perspectives on estate planning. Typically, it would help if you had estate planning discussions before marriage to avoid conflicts later. It may also help you determine if you need a prenuptial agreement to protect your individual assets and interests. But, of course, if you’re already married, then you’ll want to have this discussion as soon as possible.
While you’re having this discussion, it’s a good time to inventory all of your assets and debts, so you know what you’re both bringing to the marriage. Doing this can help you determine the distribution portion of your estate plan and can help decide what should happen with each person’s asset after one spouse has passed away.
Estate Planning For Second Marriages With Children
Having children from a previous marriage may complicate estate planning with your new spouse. For example, you may want to leave certain assets to your children, but your spouse would also like to leave a portion of the asset to their children. You may also be wondering who will manage assets on behalf of minor children once one of you passes away.
If you have children, you should consider any arrangements you have made for them in your estate plan and how it may affect what your new spouse will inherit from you. For example, you may want to update your Will or create a Marital Trust to ensure that your spouse receives a percentage of your assets and simultaneously preserve your children’s share. Likewise, if you plan to have children in your second marriage, you’ll want to make provisions for them.
You should carefully consider the age of your children when you begin estate planning for second marriages. For example, if you and your spouse have minor children, you should decide together who will manage their inheritance if one or both of you die unexpectedly. On the other hand, if you have adult children, you’ll potentially want to give some of their inheritance to them during your lifetime.
Check Beneficiary Designations
If you have any assets with a named beneficiary and you’re remarrying, you may need to update the beneficiary designations. For example, if you have a life insurance policy, retirement account, 401k, etc., and your ex-spouse is the beneficiary, you’ll want to update it to your new spouse as soon as possible. If you don’t, your ex-spouse will collect all the assets.
You should also think about how your assets should be titled. For example, you may be thinking of adding your new spouse to the title of your home as joint tenants with full rights of survivorship to keep things simple. But if you pass away, your spouse will have full ownership of the property, and they can do whatever they wish to do with it despite what you may have written in your Will or Trust.
Look for Gaps in Your Estate Plan
Before you start estate planning for a second marriage, you should consider any gaps that exist that can potentially leave your assets at risk. For example, if you don’t have a Will or Trust when you pass away, you’re leaving your family’s inheritance up to state laws, not your wishes. This could potentially mean that your new spouse receives everything, and your children receive nothing.
If you’d like to pass any assets to your spouse or children and would like to avoid estate and inheritance tax, then a Trust can be a helpful estate planning tool. If you’re bringing in a lot of assets into your second marriage and are concerned about potential conflicts when it comes time for distribution, you should consider a Trust. You should consult with an experienced estate planning attorney to decide if a Trust is necessary when estate planning for a second marriage.
Another thing to consider when estate planning for second marriages is life insurance. You should think about whether you have insurance coverage for each of your children and surviving spouse. Each spouse should have life insurance coverage, especially if one is the primary wage-earner and the other is the primary child caregiver. You should consult with your life insurance agent to decide if you have enough coverage or if you need more.
Lastly, you should consider what you need for end-of-life planning. For example, long-term care insurance can assist with paying for nursing home costs, so your family isn’t left financially drained. You should also consider a Financial Power of Attorney, Medical Power of Attorney, and Living Will. This will ensure your wishes are carried out when you are near the end of your life or if you are in any situation where you’re unable to make any financial or medical decisions on your own.
Summary of Estate Planning for Second Marriages
When estate planning for second marriages, it’s difficult to decide what’s fair, so it’s crucial to start this conversation early on. You should know and understand what the largest challenges of estate planning for a second marriage are so you can come up with a plan together that you are both satisfied with. If you have children, you should update them about your estate plan so they understand how their inheritance may be impacted.