If you are about to remarry or have recently remarried, you obviously want to celebrate, but after the celebration, it’s time to focus on another important matter: updating your existing estate plan, or preparing a brand new plan, in light of your new marriage. Creating an estate plan for second marriages has unique challenges since most second marriages create blended families. Spouses of second marriages often have to weigh two factors when creating or updating their estate plan: the past and the future. Frequently, each spouse in a second marriage has had a past marriage in which they may have had children, bought properties, created estate plans, and established goals. After remarrying, spouses typically want to provide for their new spouse, as well as for their children from their first marriage; however, sometimes each spouse’s past and future considerations differ. Estate planning lawyers use complex techniques in order to create a tailor-made, custom estate plan that balances the past while planning for the future.
Create a New Trust or Update Your Existing Trust
Although spouses entering into a second marriage generally wish to provide for their new spouse in their estate plan, if you leave all of your assets to your new spouse, there is no guarantee that he or she will provide for your children from your first marriage after you are gone. If your new spouse has children of his or her own from their first marriage, providing for those children (instead of yours) may be more of a priority to your new spouse. A good way to ensure that your children from your first marriage are protected and provided for is to create a new revocable trust, or update your existing revocable trust, and include specific provisions governing how your assets will be distributed after your death. Creating (or updating) a trust, and then funding the trust with your assets (either by retitling the assets into the name of the trust or by naming the trust as the pay on death beneficiary of the assets), allows you to keep your assets separate from the assets of your new spouse, and avoids any unintended complications or results. In your new or updated trust, you may wish to leave a specific monetary gift or a specific percentage of your trust assets to your new spouse, and the remainder of your trust assets to your children from your first marriage. After you pass, your trust becomes irrevocable, meaning that your trust cannot be modified or amended, which ensures that your assets will be passed on to the beneficiaries who you intended to provide for, such as your children from your first marriage.
Estate planning lawyers also use irrevocable trusts in order to balance the past and future goals of spouses in a second marriage. An irrevocable trust created during a grantor’s lifetime generally cannot be modified, amended, or terminated, except under limited circumstances or pursuant to a court order. An irrevocable trust allows the creator of the trust to put aside certain assets by transferring them into the irrevocable trust, consequently removing the possibility of a second marriage spouse controlling or gaining access to those assets. Accordingly, in second marriages, a spouse can utilize an irrevocable trust to protect an asset during his or her life, and then transfer such asset to a specific individual, or set of individuals (such as his or her children), upon his or her death.
Include a Residence Trust in Your Estate Plan
When spouses in a second marriage move in together, another common issue arises: what happens to the marital home once the first spouse passes away? Often second marriage spouses will move into a home that is already owned by one of the spouses. Typically, in this situation, the property-owning spouse in a second marriage wishes for the home to eventually pass to his or her children from the first marriage, since the home was purchased solely with the assets of the property-owning spouse. However, the property-owning spouse does not want his or her new spouse to be forced out of the home (i.e., become “home-less”) when he or she dies. To address this issue, an estate planning vehicle which is often beneficial to second marriage spouses is the inclusion of a residence trust within their trust provisions. Including a residence trust in an estate plan is especially common following a second marriage where one spouse brings real estate to the marriage, but chooses not to add their new spouse to the title. Including a residence trust in an estate plan allows the surviving spouse to continue to live in the marital home for his or her lifetime after the property-owning spouse passes away, despite not having his or her name on the title. Once the surviving spouse passes away, or if the surviving spouse chooses to move out of the marital home, then the home will pass to the beneficiaries named in the property-owning spouse’s trust (such as his or her children from the first marriage). Creating a residence trust, therefore, offers second marriage spouses the ability to care for one another and their living arrangements in the future, while also allowing each spouse to provide for their respective children.
Update Your Beneficiary Designations
Another important way to plan for the future as well as to protect assets acquired in the past following a second marriage is to update your beneficiary designations. While such a step may seem simple, failing to make necessary changes in your beneficiary designations can have unintended negative consequences. Failure to update beneficiary designations can leave your surviving spouse with little means of support after your death if all of the beneficiary designations on your assets name your former spouse, your children from the first marriage, or other beneficiaries. If you were divorced from your first spouse, you may not be able to change some of your beneficiaries, depending on the terms of your divorce decree. If you cannot change your beneficiaries on certain assets, you may want to consider buying additional life insurance policies, retirement accounts, or other assets, and then naming your new spouse on those new assets as a way to provide for the new spouse outside of your estate plan documents. Meeting with your estate planning lawyer following a second marriage can help you identify which beneficiary designations need to be updated to achieve your past and future goals.
Discuss Your New Goals
Prior to meeting with an estate planning lawyer, it is important that you and your new spouse have an honest conversation about your past and future goals. Specifically, you need to discuss how you want to provide for each other, as well as which assets you wish to leave to your children from your first marriage or to other family members. No matter how well your goals match, or deviate from one another, meeting with your estate planning lawyer will allow you to have peace of mind in knowing how, when, and where your assets will be going. If you would like to discuss preparing a new estate plan, or updating an existing estate plan prior to or after your second marriage, please contact me at 847-705-7555 or
[email protected] to schedule a consultation.
