Estate Planning in a Second Marriage

Kaycee Cuaira

estate planning in a second marriage

Wills and estate plans are always a little unique, since every person and family situation is a little different, but estate planning becomes a little more complex than normal if you have been married more than once.

Having some plan in place is better than no plan, especially if you have remarried. If you do not plan ahead, you could end up unintentionally disinheriting children from your first marriage. Or you could accidentally have retirement or life insurance policies going to your former spouse rather than your current spouse. There are a number of things you should consider updating or adding in your estate plan after you remarry to make sure your property and assets are distributed the way you want.

Estate Planning in a Second Marriage

In the name of simplicity, some people plan on having their estate go to their surviving spouse and trust that their spouse will leave some assets and property to their stepchildren in their own will. However, it is not uncommon for a surviving spouse to disinherit their stepchildren, whether intentionally or unintentionally.

If you have children from a former marriage and want to make sure they receive an inheritance, consider setting up a trust, in addition to having a last will and testament. That way, you can make sure estate assets and property are distributed to your spouse and your children from all marriages. [Tomorrow can help you do both for under $40!]

This can prevent a few scenarios that are less than ideal, like having your property or assets pass to another person unconnected to you. This could happen, for instance, if you predecease your spouse, and they remarry and leave everything to their new spouse in their will.

Setting up a trust can also allow you to have assets distributed over time to your spouse or children, which is especially helpful if you are concerned they will spend their inheritance all at once.

Property

Inheritance of property has some similar issues. As part of your estate planning in a first marriage, you may own real property, vehicles or other property together, as joint tenants with rights of survivorship. That means that if one spouse dies, the other spouse has full title to the property.

Owning property as joint tenants with rights of survivorship can be an effective estate planning strategy, since the property will not have to go through probate after one of you dies, but there could be a few wrinkles, especially if either of you had children from another marriage.

The surviving spouse could easily pass on the property to their children only or to a new spouse in their will, regardless of what a will or trust says. The deed or provisions for joint tenancy with rights of survivorship, if set up correctly, will generally trump provisions in a will or trust.

Account Beneficiaries

If you have any accounts with listed beneficiaries, they should be updated once you remarry to reflect any changes in your plans. For instance, you likely will not want to have your former spouse listed as the beneficiary on your retirement account or life insurance policy.

Part of this may be necessary to review anyhow as part of a divorce decree—you could be asked to maintain a life insurance policy with your children from the marriage as beneficiaries. If that is the case, and you remarry, you should consider adding a new life insurance policy with your new spouse listed as the beneficiary—and consider putting your new spouse as the beneficiary on your retirement accounts as well. Another option would be to have your life insurance policy set up to pay into an Irrevocable Life Insurance Trust (ILIT). Then the proceeds from life insurance can be distributed as you wish, and not all at once. This protects the life insurance assets from creditors, irresponsible spending, divorce, etc.

You may have other accounts that are joint accounts or have a transfer on death element to transfer to your spouse when you die. Just remember that if your new spouse is the beneficiary, and you predecease them, your children from the prior marriage may not share any part of those funds, and that may not be what you intended.

Trusts

A trust that is set up correctly can make ensure that your family is provided for over multiple generations, and can avoid some of the problems of having your estate go through probate, being subject to claims by creditors, new or former spouses, and predators trying to access money from your heirs.

If you have enough property and heirs for there to be potential for conflict, setting up a trust can minimize the issues that lead to conflict and allow you to have peace about your family’s financial future.