At any given time I have a handful of long-standing clients and new potential clients who are thinking about marriage ... for the second or third time. Whether following a divorce or the death of a spouse, forming a "blended family" is a rather common occurrence.
And a blended family means a "blended estate," with children and assets often coming as part of the deal.
It can get complicated.
Discuss Money. This is a major stressor in any marriage. When it comes to a second or third marriage, however, it can be really challenging.
As with money issues in a first marriage, communication is key.
Likely each party has an accustomed standard of living and lifestyle. Oftentimes, one spouse "stimulates the economy" and the other clips coupons.
Come to an agreement when it comes to spending and saving. A budget can help.
Consider a prenuptial or postnuptial agreement. Sign a prenuptial or a postnuptial agreement to make clear what would happen in the event the new marriage "does not work out" and if one spouse predeceases. At a minimum, the agreement should be inked well in advance of the big day, both parties should be represented by independent attorneys and there should be full financial disclosure.
In the absence of an agreement, a surviving spouse has the legal right to take an “elective share” of the deceased spouse’s estate. Independent of what the will or trust day, this "share" is commonly one-third or one-half of the elective estate.
If challenge occurs, then it may result in the unintentional disinheritance of your children or other heirs.
Bottom line: The only way to trump the elective share laws is to sign a prenup or postnup where both parties waive their rights to the elective share. This reduces the chance that state law will interfere with your respective estate plans.
Revise your will and other estate planning documents. Remarriage does not revoke a will (although state law can supersede it), so it is critical that you draft a new will or trust that takes into account your new circumstances.
While you are at it, take a close look at your beneficiary designations on life insurance and retirement funds.
Providing for children from a previous marriage. It can be a big concern in many second marriages to provide for the new spouse without cutting out children from an earlier marriage. An estate planning attorney can help you both honor your vows to your new spouse and provide for your own children.
One technique is to place your assets into a qualified terminable interest property (QTIP) trust. With a QTIP all trust income is devoted to supporting the surviving spouse now while the principal is preserved for the children later. Plus, assets passing to a valid QTIP trust qualify for the marital deduction, which helps reduce possible estate taxes at your passing.
As I tell my clients, love may be blind ... but it is best to approach marriage with both eyes open.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference: Des Moines Register (April 14, 2015) “Estate planning for a second marriage”