Estate planning when a person has been married before or has children from previous marriage is a very difficult subject to undertake, but like most estate planning issues it should not be ignored. There are a multitude of reasons why a simple estate plan will not work for most second marriages.
What is a Simple Estate Plan? and Why does Extra Care Need to be Taken Planning your Estate When There is a Second Marriage?
A simple estate plan, which can be commonly referred to as an “I love you will” is a natural distribution wherein everything is passed from the decedent spouse to the surviving spouse, and if there isn’t one (i.e. at the second death) to the children. Sounds natural right? Why would this be a problem in a second marriage? There are a litany of issues that at least must be considered when creating a plan for a second marriage:
- The first problem that usually freaks out clients is the biggest one – if assets are left to the surviving spouse and then the children, it is only the children of the surviving spouse (without adoption) that are inheriting. So in the situation where husband and wife have children from previous relationships, and the husband dies first then his assets will pass to his surviving spouse and then her children. He has inadvertently disinherited his children!
- Fine you may think then I’ll just leave assets to my child/children at my death. Well that leads to the problem that any assets left to the child will no longer be available for the surviving spouse’s well being and financial needs.
- What if there is a business? Who is buying out who? Can your surviving spouse run the business? If she can should she now work from the decedent’s children from the first marriage?
- If one spouse is the primary bread winner, should everything be left 50-50 between decedent spouse’s heirs (whether they are children or other heris) and a surviving spouse? What about the elective share which states that *something* must be left behind to a surviving spouse (the amount differs State to State)?
- Is there a prenuptial agreement that has to be honored/considered? What about a post-nuptial agreement?
- What about the previous divorce decree? Was the decedent spouse supposed to leave a life insurance policy wherein the ex-spouse and/or children from a previous marriage? If so, and the policy has lapsed and/or was never taken out then the child or ex has a claim against the estate.
- Let’s say you are smart enough to say, “I know what a QTIP is and I want one of those” there are still issues to be discussed! A Qualified Terminable Interest Property Trust (QTIP) is a type of trust that allows a decedent to put his assets into a box (a trust) that provides the surviving second spouse with income and then at his or her death it gets distributed how the decedent wanted (presumably to the children from a previous marriage). Well let’s say the spouses are 55 you have now forced a 30 year relationship between your child from a previous marriage and your surviving spouse. Every time he or she spends your child is going to be there like a hawk circling.
So what’s the answer? There could be a few. How is that for an attorney’s answer? All joking aside, if you are in a second marriage it is imperative that you work with a qualified estate planning attorney to go over these issues to ensure that your testamentary intent is being followed.