If you have followed my posts over the years, then you know I have written fairly frequently on the subject of second marriages and blended families.
There are two reasons behind such attention.
First, second marriages and blended families are quite common and, second, they present unique estate planning challenges.
So, what do I mean?
One simple question sums it up: Are you going to disinherit your own children by default rather than by design?
A recent article in the Meridian (MS) Star, titled “Estate planning after a second marriage,” has taken up this timely topic.
The article observes that several means to provide an inheritance for your own children when you remarry include making them the primary beneficiaries of a life insurance policy under which you are the insured, creating a trust for them, or placing certain real property under joint ownership with them.
Adding the name or names of anyone to your property, whether real (estate) property or other property (that brokerage account), can have unintended consequences.
For starters, such property will be subject to all of the legal and financial risks of your new joint owner or owners.
Can you say divorces, lawsuits and bankruptcies ... oh my!
On the other hand, one critical must do when it comes to a second marriage is to write (or update) your last will and testament. Be extremely specific about which heir gets what. According to the original article, your bequests must be stated clearly.
In fact, the more convincing your bequest, the less ambiguity and the fewer issues that will arise.
While you are at it, update the beneficiary designations for retirement plans, investment accounts, and insurance policies.
However, if you have been divorced, watch out!
You may be precluded from changing beneficiaries in certain cases, to include under your divorce decree. Revising your beneficiary designations may violate that decree.
It is never wise to violate a court's decree. Trust me on this.
Consider creating irrevocable trust to provide for your new spouse and your own children.
As the article observes, some second marrieds create a separate property trust to provide for their new spouse and designate their real property to their children.
Parents also can create irrevocable trusts to direct assets to particular children.
These can be a great estate planning vehicles because: (i) unlike a will, a trust agreement is not a public document; (ii) assets within irrevocable trusts are shielded from creditors and from inheritance claims of spouses of the adult children named as heirs; and (iii) an irrevocable trust represents a “finalized” estate planning decision which, in turn, guarantees that particular assets transfer to a parent’s own biological children.
To further sweeten these enumerated benefits, the original article notes that irrevocable trusts are rarely undone.
No article on second marriages and blended families would be complete without mention of premarital agreements. These negotiated agreements are the legal mainstay when it comes to memorializing each parties rights and understandings before exchanging vows.
Sometimes post-marital agreements can be a good fall back, if both parties realize the need for some clarity of rights and interests once hitched. Be sure your state of residence recognizes their validity.
Remember the fundamental ingredients of a valid premarital agreement? They include full disclosure of each party's assets and liabilities, clear provision for respective property rights during the marriage, if separated or divorced and distributions upon death.
Oh, by the way, make sure there is ample time between when the agreement is signed and the wedding day. Judges are suspicious of premarital agreements signed just before the "wedding march" begins!
Be sure to consult with an experienced estate planning attorney before you run into trouble.
Second marriage estates with any level of complexity require professional legal assistance from those with a thorough understanding of estate planning and tax issues.
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "estate planning Overland Park KS".
Third, either way, verify. Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.
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), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: The Meridian (MS) Star (September 27, 2015) “Estate planning after a second marriage”