A second marriage often brings joy; but it also presents unique challenges, especially if you have children from your first marriage.
Estate planning in second marriage can be complicated, but with thoughtful planning and by being clear and explicit about your wishes, you can avoid many of the potential pitfalls that come with a second marriage and a blended family.
In a first marriage, most couples have essentially the same estate planning goals: take care of the surviving spouse until he or she dies, and the rest of the assets go to the children.
In a second marriage, things become more complicated. In some cases, there are his children, her children, and our children.
Also, each spouse often brings different assets, different life experiences, and may have different goals when it comes to estate planning. By discussing these matters openly, with the assistance of a skilled estate planning attorney, you and your new spouse can craft an estate plan that meets the needs of you and your blended family, and clearly expresses your intentions through your estate planning documents.
Consider the following scenario:
Joe and Jane are married with three children. Joe passes away at an early age. Jane meets and marries John. Jane and John create a new estate plan that leaves their assets to each other at death, and then to Jane’s children.
Jane and John later have two children together.
Jane tragically dies, and all of the couple’s assets go to John. John marries Jamie and writes a new will after Jane’s death. John’s new will leaves all of his assets to his new wife, and the children he had with Jane.
What about Jane’s children with Joe? They have been disinherited and receive nothing.
There are several ways this situation could have been avoided. When Jane created a new estate plan with her second husband, John, she could have taken steps to ensure that her children from her first marriage received some of her assets at her death. She could have given specific assets to her children in her will; she could have designated them as beneficiaries on a life insurance policy; or she could have created a trust that would benefit her first three children she had with her first spouse Joe.
Estate planning in a second marriage can be especially difficult because new spouses may wish to allocate assets differently between one set of children versus the other.
Or, consider the opposite scenario where a spouse leaves her entire estate to her children from a first marriage, unbeknownst to her surviving spouse, who may not have enough money to live in the manner to which he has been accustomed to living. As an additional complication, state law provides protections to a surviving spouse for these types of scenarios and so the result, possibly after costly inter-family litigation, could be that the surviving spouse receives more than the children, which was not the deceased spouse's wishes or intentions.
These difficult situations can be avoided through clear and honest communication, and a meeting with an experienced estate planning attorney.
It is unlikely that the estate plan from your first marriage will meet your goals for estate planning in a second marriage. In fact, it’s critically important that you review any old estate planning documents and all retirement account and beneficiary account designations to be sure that they reflect your new situation and evolving wishes.
Before meeting with a North Dakota estate planning attorney it’s important that you and your spouse talk about your goals, how you want to provide for one another, and the extent to which you want to leave assets to each of your children.
Consider any financial obligations either of you has to a prior spouse, as well as the extent to which you wish to leave any part of your estate to children from a prior marriage.
An estate planning attorney will review any estate planning documents from a prior marriage, including wills, trusts, and beneficiary designations.
If you created estate planning documents in your first marriage, it’s important that you review and revise them. Otherwise, if your prior spouse is the named beneficiary on a retirement account, death benefit, in your will, or in your power of attorney, your children and new spouse could have to deal with some difficult and unintended consequences.
If you think this is a difficult conversation to have, it may be wise to enlist the help of a trusted professional to facilitate the conversation so each spouse’s goals are clearly laid out.
In fact, many lawyers will only represent one spouse in a second marriage, because representing both spouses could create a conflict of interest if one spouse wishes to leave a bequest to their children from a first marriage.
As you work through the process of estate planning for a second marriage, one fundamental question is whether you want to co-mingle your assets with your new spouse, or keep marital assets separate. In a first marriage, most spouses come to the marriage on relatively equal footing. But in a second marriage, there may be significant differences in the wealth of each spouse.
In some cases, especially if you still have financial obligations to a former spouse, it may be important to keep some or all of your funds separate.
Children also impact the decision on whether to co-mingle finances. If you have children from a prior marriage, even if they are adult children, you may wish to set aside certain assets for them.
Of course, it’s also important that you understand property division laws in your state. This is where a lawyer can, perhaps, be most helpful. Property acquired before marriage can retain its separate character, but don’t just assume that what’s yours is yours and what’s your spouse’s will stay your spouse’s. For example, if funds are placed in a joint account, they lose their separate character and become marital property. If you wish to maintain your assets separate from your spouse’s, consult with a lawyer to make sure you maintain the separate nature of your assets and do not inadvertently commingle your assets.
Titling your accounts and other assets is another important subject and can go a long way towards clarifying your intentions when it comes to your estate plan.
Real estate that is owned jointly will pass to your spouse upon your death. You can also title assets as “transfer on death” in which case assets will transfer to your spouse automatically upon your passing. Likewise, if you own assets or accounts jointly with your spouse, those assets will transfer automatically upon your death. You can also designate beneficiaries on many retirement accounts. These accounts could list your spouse as the beneficiary, or they cold list a child or children. Whatever your choice, it’s important that you are clear, thoughtful, and explicit about your wishes. Remember too that if you name your spouse as the beneficiary on any account, your spouse will take full ownership of those assets and can pass them to whoever they choose upon their passing. This could mean disinheriting your children altogether.
Regardless of how you choose to distribute your estate, it’s important that your wishes be spelled out clearly. Putting your wishes in writing is essential, especially in a second marriage situation. Clearly expressing your wishes in writing can save your family thousands of dollars in legal fees, and avoid potentially devastating arguments about how your estate was to be divided.
We invite you to contact the North Dakota estate planning lawyers at Fremstad Law by calling (701) 478-7620.
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