Strategies for Second Marriage Planning

An elderly couple in the gardenIf you’re thinking about getting married for a second time, planning for your finances can become more complicated, especially if you have children from the prior marriage. Blended families have special planning needs to avoid confusion and ensure assets are distributed as the owners intend.

However, there isn’t a “one-size-fits-all” approach. It’s important to think through the different types of strategies with your attorney to decide which one makes the most sense for you.

In a perfect world, your children would have a wonderful relationship with your new spouse; however, that may not be the reality for some families. Even if things seem to be going well now, family members can disagree about who should be charge of your healthcare, finances or property in the event of your incapacity or death. You can minimize these issues by having the appropriate documents in place that clarify your wishes.

Providing for all of your loved ones

With proper planning, you can also balance providing for your spouse while also leaving an inheritance for your children. Be mindful when leaving assets to a spouse outright—there is no guarantee that the property will ultimately be left to your children.

For example, if you jointly own an asset with your spouse, then your children have no right to it. Upon your death, your spouse will own it unless you designate otherwise. Similarly, if your spouse is named as the primary beneficiary on your retirement accounts, your children may not inherit any of those funds.

To ensure distribution of your assets as you intend, you may choose to use a Qualified Terminable Interest Property (QTIP) trust. A QTIP trust allows you to provide for your surviving spouse upon your death, but also control how the trust’s assets are distributed once your spouse dies.

Your spouse will receive trust income while he or she is living. However, upon his or her death, the assets are passed on to the beneficiaries of your choice, such as your children. And because the terms of the trust can’t be changed, you can be assured that the assets will ultimately be distributed to your beneficiaries after your spouse’s death.

Your home

Your house can also cause arguments between your spouse and your children or other beneficiaries. Perhaps you want to let your spouse live in your home for as long as he or she can or would like to. Once your spouse no longer lives there, you may want the residence or the profits from its sale to go to your children, loved ones, or a charity of your choice. You can accomplish this by having the property held in a trust, like the one described above.

With a trust, you can define how your house will be managed. For example, you may provide for your spouse to live in the house rent-free, but require that he or she be responsible to pay for maintenance, repairs, utilities, insurance and real estate taxes. You can also include a provision permitting the sale of the house and the purchase of another, which can be at your spouse’s direction.

Your personal property

What happens to your personal property such as household contents, jewelry, artwork, collections, family photos and family memorabilia can be a battleground between your spouse and other beneficiaries. Weigh the financial and emotional values each family member places on these items before deciding how they’ll be distributed.

Some state laws allow for an informal list in your will to specify who will receive your personal property. An informal list may be changed without the formalities involved in changing your will, giving you more flexibility to revise the list from time to time.

In states where such lists aren’t legally binding, your executor will ensure your final wishes for distributing personal property are carried out. If it’s important that certain items go to specific people, be sure to state that clearly in your will.

Prenuptial agreements

Some couples enter their new marriage with an understanding ahead of time as to how assets would be divided between them in the event of divorce or death. To be legally binding, many couples state their intentions in a “prenuptial” agreement.

By this legal contract, the couple agrees prior to the marriage to modify certain rights which may relate to property, support, and inheritance that each would have as a spouse, and that their contract should supersede local law.

If you enter into a prenuptial agreement or, in some cases, a postnuptial agreement, which is created after the marriage, make sure that any existing will you have is consistent with your agreement. For example, if the agreement allows your spouse to continue to live in the house that you own, and your will calls for the home to be sold upon your death, you’ll need to update your will. If you do any estate planning as a married couple, make sure to provide the attorney with a copy of your agreement and your will so that that your new plan corresponds with the terms of both.

If you become disabled

Most courts presume that your spouse should have the right to make financial or medical decisions if you are incapacitated. If you prefer a child or other loved one make these decisions, consider executing a durable power of attorney and a health care proxy.

Should you or your spouse become disabled, your combined assets will be used to pay the cost of long-term care until you or your spouse is eligible for Medicaid. You may want to consider long- term care insurance to protect the inheritance of any non-spousal beneficiaries.

A thorough estate plan coordinated with legal documents such as your will and prenuptial agreement, if any, can keep peace among your family members if you die or become incapacitated. With estate planning tools such as trusts, you can also make sure you’re providing for all family members in the manner you prefer. Consult your estate planning attorney for more information on creating a plan that’s best for your situation.

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