Typical estate plans for long-standing first-time married couples make sure the surviving spouse is taken care of for as long as he or she lives, then whatever assets remain will be left to the children. More than likely, everything will go to the surviving spouse upon the passing of the first spouse, just as they had planned.
But estate planning for second marriages, especially those with blended families, are more complicated and present many different concerns. These new families can involve children from a prior marriage as well as children from the new union, sometimes jokingly referred to as “yours, mine and ours.” Each spouse usually brings assets into the new marriage and often wants to ensure that their assets will pass to their children, not their stepchildren, after providing for the surviving spouse.
Estate planning methods relied upon in the first marriage typically will not work now.
Real Estate Example
Let’s take the example of a wife who adds her new husband’s name to the title of their home. In Massachusetts, married spouses typically own their home as tenants by the entirety. This means there is a right of survivorship. For example, if she dies first, her share will immediately transfer to her new husband, who now has complete ownership of the home. He can do whatever he pleases with it now, even if her will or trust says something different. He can leave the house to his own children and completely disinherit the stepchildren (her children).
Beneficiary Designations
Beneficiary designations must also be carefully made in second marriage situations. Most people name their spouse as the beneficiary of their 401K accounts, life insurance, and other retirement savings plans. But this can become an issue as the new spouse who has been named as the beneficiary, after the death of the owner spouse, can now name anyone they want as the beneficiary of this account, thereby disinheriting the deceased owner’s children. Promises can be broken after one spouse is gone. Often, this means excluding the stepchildren.
Other second marriage considerations:
- Disability and long-term care needs can be an issue, especially if assets meant for your children’s inheritance are now used to pay for your spouse’s care. If you or your new spouse become ill and require Medicaid or MassHealth assistance, your combined assets will be considered as “available assets” to pay for the care. Asset protection planning may be needed to protect the assets to provide for the healthier of the two of you. Long term care insurance may also be an option.
- Utilizing a trust and naming the trust as the beneficiary for your life insurance policies and tax-deferred plans is often a good choice for second marriages. This allows you as the creator of the trust to keep control over how and to whom the proceeds are distributed. If you were to predecease your spouse, they can receive lifetime income, yet the trust will retain control over the rest of the proceeds and distribute them as you instruct. Keeping the proceeds in a trust will also protect your loved ones from irresponsible spending, creditors, predators, divorce, remarriage, and even estate taxes, if done properly.
- If your new spouse has considerably fewer assets than you, it is possible to provide for them until death or remarriage, then have the remaining assets distributed to your children. This is often accomplished through a life estate or Qualified Terminable Interest Property (QTIP) trust. A QTIP trust is a marital trust designed to provide for your spouse after your death while protecting your assets for future generations. The QTIP trust also offers flexibility to your Personal Representative in maximizing your federal estate tax savings.
- If your new spouse is much younger than you, your children may be concerned that your new spouse is “only after your money”. Although these feelings may subside as the marriage lengthens, your children may wonder if they will ever receive their inheritance. Consider distributing some of their inheritance upon your death, then the remainder at your surviving spouse’s death or remarriage.
Many factors affect an estate plan and it only gets more complicated with second marriages. To help you sort through these issues and many more, work with an experienced Estate Planning or Elder Law Attorney.
Founded by a Nurse Attorney and with offices in Acton and Sudbury, Generations Law Group helps blended families create a plan for all of the generations.
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