With people living longer than in the past, the frequency of remarriage is increasing, even in later years. This last phenomenon raises a number of old legal inheritance planning issues. On the other hand, we’re also seeing a growing number of mixed families with “his and hers” children, creating a series of other potential pitfalls.
Most of these estate planning problems can be resolved with the attention of the client and the loving guidance of their estate planning attorney.
Here are some of the main problems and potential solutions for planning a second wedding.
1. The duration of the second (or third) marriage and also the relative financial position of the parties. Recently a client came to see us whose husband had early Alzheimer’s. His IRA named his children as beneficiaries years ago. The couple have now been married for thirty-five years and the wife will be left destitute without her husband’s IRA. May the husband have the capacity to understand the situation and make changes. One option: the husband can leave his IRA to his wife on the condition that the wife names her children as heirs upon her death.
2. In our experience, much thought must be given to what children would receive from a first marriage if their parents were to be the first to die. By looking at the problem from the heir’s point of view, we can often give direct inheritance of a portion of the property, or their name as heirs on the insurance policy, so that they feel loved and cared for by their parents and not demoted to an inferior position. This is especially important if the parents are married to a much younger spouse. Needless to say, this would also greatly affect their future relationship with the surviving stepparents. The carelessness of this area alone has caused lifelong injury and suffering to many children of remarried parents.
3. The use of trusts is often an important tool where the surviving spouse requires a large proportion of the combined assets to survive. Here, the problem is how to guarantee that the children of the deceased spouse will receive their fair share of the death of the living spouse. Usually, we set up one trust if the estate is not subject to property taxes, or two trusts if needed to reduce or eliminate land taxes, and have both spouses as representatives of the trust. Guardianship provides equal distribution between him and his family after the second death. What prevents the surviving spouse from robbing her of her trust and giving everything to her own children? Generally, we recommend a professional co-trustee to serve with a living spouse, to prevent this from happening.
4. The estate planner must consider any prenuptial agreements as well as any obligations to children arising from the divorce decision. This may need to be changed after a few years to reflect the current situation which may have changed greatly. For example, over the years one spouse will often want to give the other the right to live in the marital home, if he or she becomes a survivor, something that was expressly prohibited in prenuptial agreements made years earlier.
5. Long-term care obligations have proven daunting to many couples later in life. Even prenuptial agreements stating that the spouse’s assets are separate and that they have no financial obligations to each other are not binding vis-a-vis Medicaid. Medicaid considers the combined assets of a married couple to be available for the care of an ailing spouse, regardless of their name. Therefore, the need, amount, and availability of long-term care insurance are often factors to consider in a second marriage.
6. For a wealthier couple, one partner may wish to keep the less well-off partner for the rest of their lives but then the unused funds are returned to their biological family. Here a QTIP (Qualified Terminable Interest in Property) trust can be formed for a surviving spouse, which will (a) provide lifelong income, (b) defer, reduce or frequently eliminate property taxes, and (c) protect inheritance for the children. child of a deceased spouse.
As you can see, with a little care on your part and the help of an experienced legacy estate planning attorney, often gleaned from hundreds of cases, second marriage partners have the ability to “do the right thing” for all interested parties.
