Second Marriage? Make Sure Your Estate Plan Is Ready

It’s always a good idea to review your estate plan, especially when a major life event, like a second marriage, is taking place. The use of pre-nuptial agreements gives prospective spouses the opportunity to discuss one another’s rights of inheritance and clarify a great many issues, says nwi.com in the article “Estate Planning: Planning for second marriages.”

There’s a second opportunity to sign an agreement detailing inheritance rights after the wedding takes place, called a “post-nuptial agreement.” The problem is that once the wedding has occurred and you are both legally married, you might get stuck with some surprises and, well, you’re married. For most people, it’s better to set things out before the wedding, rather than after.

Having the discussion prior to marriage can also help with financially planning your life together. There may have been dissolution decrees in one or both of the couple’s prior divorces that have requirements which must be satisfied, such as maintaining a life insurance policy with the ex-spouse as a beneficiary. This can have an impact on the couple’s estate plan. Because of arrangements like this, it is recommended that you have everything discussed upfront in the pre-nup.

There are also additional steps that should be followed for any estate review upon a marriage. First, make sure that the last will and testament reflects your new spouse. For second marriages in particular, you want to make sure any mention of the prior spouse lists them as just that, a prior spouse only.

Next, verify and confirm how all of the assets are owned. Will they continue to be owned by just one spouse, or converted to jointly owned? Does your estate plan have a trust, and if so, are assets owned by the trust? Does there need to be a change made to your trustees?

Many people don’t remember how their bank accounts are titled. Fewer still can tell you who their beneficiaries are on their retirement accounts, life insurance policies and bank accounts. Remember: the beneficiary designations are going to determine who receives these assets, regardless of any language in your last will and testament. Once you die, there is no way to contest that distribution. Review your accounts and make sure that the beneficiaries are up to date, especially if you want to remove your prior spouse from your designations.

Part of your pre-nup and estate plan review should include a discussion of inheritance rights for any children in the blended family. Do you want to leave assets only for your children, or do you want to leave assets for all the children? It’s not an easy conversation to have, especially at the start of the blending process.

Remember also that blended family dynamics can change over the years. When you review your estate plan next—in three to four years—you’ll have the opportunity to make changes that hopefully will reflect deepening bonds between all of the family members. Your estate planning attorney will help create and revise estate plans as your life circumstances evolve.

Reference: nwi.com (May 5, 2019) “Estate Planning: Planning for second marriages”

Why Do I Need a Prenup for my Second Marriage After 50?

As we age and move through life, the hope is that our wealth will accumulate, which is something to consider when saying “I do” as an older person or a second time. Many older people who remarry have significant assets—like pensions, retirement funds, homes, and maybe businesses and children from their prior marriage. The financial consequences could be significant if their second marriage doesn’t last. Forbes’ recent article, “All About Prenups For Second Marriages,” says that a prenup can address the following common issues that arise:

  • Supporting the new spouse through retirement;
  • Paying for expenses and accumulation of marital property if the spouses have retired;
  • Leaving assets to children if the new marriage is ongoing at the time of death;
  • Balancing the needs of the new spouse with helping their own children;
  • Planning for possible financial results, if the marriage fails; and
  • Ensuring a peaceful divorce process, if the marriage fails.

In a prenup, the couple can decide how they will support themselves during the marriage and can create a plan for withdrawing retirement assets, depending on their relative wealth.

An issue with prenups for many second marriages is the distinction between “separate property” and “marital property.” Separate property is typically the property brought into the marriage and all past and future inherited property. Marital property are those assets that are built up through the efforts of the spouses, usually by lifetime earnings in the workplace.

But what happens if the couple is retiring soon into the marriage with no opportunity to accumulate marital property and one of the spouses doesn’t have adequate separate property to provide for his or her retirement? That spouse may then feel vulnerable if they divorce. This can foster bad feelings that fester during the marriage. A prenuptial agreement can alter this dynamic and provide a fair result that still protects both spouses if the marriage ends or if a wealthier spouse predeceases a less-moneyed spouse.

In a second marriage after 50, many people want to leave money to their children when they die and also provide for their new spouse. A prenup can detail that an estate plan be created after the couple marries to get the result they desire. The assets of the deceased spouse can eventually be distributed to the surviving spouse and the deceased spouse’s children. Some assets can be placed in a trust to benefit the surviving spouse during his or her lifetime. The rest can go to the children of the first spouse after the death of the surviving spouse. In a second-marriage prenup, a couple can also decide the way in which they might assist their children financially during the couple’s lifetime.

A nice benefit of a prenup for a second marriage is that it can specify the legal process to use if the couple divorces. For example, a prenup can require alternative dispute resolution if there’s a divorce or if there is a disagreement between the heirs of a spouse and the surviving spouse.

However, sometimes, a prenup can even cause issues, typically in the process of negotiating one. Some couples even break off their engagements as a consequence. However, marriage relies on mutual consideration and trust, and these are important issues to discuss with someone you’re hoping to spend the rest of your life with. Talk to an attorney about creating an equitable prenup.

Reference: Forbes (February 13, 2019) “All About Prenups For Second Marriages”

Why Should I Sign a Prenup?

NBC News’ recent article asks “Prenuptial agreements: What is a prenup and should I get one?”

So, should you sign a prenup?

First, a prenup is a legal agreement entered into between two people before they are married, that can cover many issues dealing with property rights and assets. In addition to the traditional role of division and distribution of assets in the event of divorce, pre-nups can also cover death, incapacity, estate planning, student debt, spousal support, and other legal issues.

There are other reasons to sign a prenup. For example, what if one spouse has a child from a prior marriage and must provide support for that child from marital income? Divorce laws also vary state by state, so if you live in a state that has laws of equitable distribution, but you move to a community property state, it is important to protect your assets and instruct how they’ll be distributed.

When financial assets get commingled in marriage, it can get complicated. Buying a house together with just one person’s money, is deemed to be commingling. Starting a business together using one person’s capital is also commingling. Even transferring money more than a few times can constitute commingling. The longer you’ve been married, the more apt you are to commingle your assets and have non-marital assets become marital. As a result, they’re divisible assets.

But aren’t prenups just for rich people? No.

Many folks think of a prenuptial agreement, as only for those with substantial means to protect. This isn’t always true, as many millennial clients hire attorneys to assist them with a prenup to protect them from a future spouse’s student debt.

These couples have discussed their financial situations in detail, before hiring attorneys to draft a prenup. That makes for no unpleasant surprises.

Finally, you can get a prenup online, but you’re likely wasting your time and money. That’s because there are complex legal issues involved, and you need to understand your rights. An online approach is risky and may not be complete.

Reference: NBC News (April 12, 2019) “Prenuptial agreements: What is a prenup and should I get one?”

At What Life Stages Should I Review My Estate Plan?

When a person hits the age of 18, they should at least have powers of attorney to designate who will make their healthcare decisions and handle their finances, in the event of any incapacity. When a person starts to accumulate assets and have children, it’s critical to have an estate plan in place, including guardianship nominations.

Bankrate’s recent article, “Estate planning triggers: When to re-evaluate your estate planning strategy,” says the risk of not having a current estate plan and will that state your wishes is significant. When people fail to put any plan into place, it leads to confusion, chaos and unintended consequences. Use this list of important life events as triggers to remind you to discuss your current situation with a trusted attorney.

Getting married. You and your future spouse probably have had some financial conversations before getting engaged. However, if you haven’t, once wedding plans are set, it’s vital to discuss all aspects of each partner’s financial situation and the desired distribution of assets. You should decide whether to sign a prenuptial agreement, the totals of your separate and joint assets and who you want to inherit those assets should one or both spouses pass on. In light of these factors and the prenuptial agreement, an estate plan that satisfies both parties must be created.

Starting a family. The decision to have a child comes with the responsibility of planning for that child’s care. You and your partner will want to determine the amount of your assets you want to pass to your children in the case of a death, at what age your children will inherit those assets and name a legal guardian.

Divorce. If a couple decides to divorce, it’s important to update their separate estates. If you fail to change the beneficiary designations for a trust or life insurance policy after getting divorced, your ex-spouse may receive the life insurance that was supposed to be paid out to the trust to provide liquidity to pay off debts and administration expenses.

Retirement. Beneficiaries are named when setting up a 401k or Roth IRA account. If you started the account years ago, the beneficiaries may be out-of-date. Account owners should look at their total retirement assets and update their beneficiaries to reflect their current relationship and financial circumstances.

Other life events. Any significant change in assets, a move to another state, the death or disability of a person named in your estate plan, a change in tax laws, a disability of a beneficiary that arises after the initial plan is executed, and/or the birth, adoption, or death of a child are all important life events that should trigger a revision of your estate plan.

Reference: Bankrate (March 4, 2019) “Estate planning triggers: When to re-evaluate your estate planning strategy”

What Should My Fiancé and I Discuss About Finances Before We Say “I Do”?

If you’re older and remarry, you may have more assets and you probably have children. That’s different than a first marriage, where people often enter as financial equals. In subsequent unions, situations are more complicated—and the stakes are higher. You should protect your money in the event of divorce and protect your children in the event of your death.

Barron’s recent article, “How to Manage Your Money When You’re Remarrying,” says the subject of money should be easier this time around. Money talk might have been taboo going into your first marriage, but experience—and the battle wounds of divorce—tend to make this dialog much easier.

The best strategy for navigating the financial side of remarriage is to be direct and give yourself plenty of time before the wedding to work out the details. All good financial plans start with a broader discussion that has more to do with identifying and setting goals, than it does about dollar signs.

Consider what you hope to achieve individually and as a couple over the next year, five years, decade, and so on. Discuss your priorities and intentions, be specific, and write it all down. Your conversation will be the groundwork for the specific financial planning decisions the two of you will need to make, when it’s time to formalize your plans for merging finances or—as the case may be—keeping them separate.

Prenuptial agreements, or “prenups,” are becoming more frequently used by millennials because they are marrying later and bringing more assets and debt to the marriage. In the case of remarriage, a prenup should be strongly considered by most couples. This legally-binding agreement details how assets and liabilities will be divided, in the event of divorce.

Many experts suggest keeping separate checking, savings, and investment accounts—but setting up joint accounts for shared lifestyle expenses. Having a joint account removes the need for constant discussion about how you’ll divide expenses. Create a monthly joint budget and agree on the fairest way to split it. Some couples divide it down the middle, while others base it on a percentage of their respective incomes.

You don’t need to have all of your estate plans settled before the wedding but be certain to update key documents where appropriate—such as your wills, medical advance directives, retirement plan, and insurance beneficiaries.

A big trouble spot for couples remarrying—especially if there are children and grandchildren from other marriages—is how assets will be divided in the future. Without a clear estate plan, if you die first, then the assets will pass to your spouse and then to that spouse’s children, depending on the type of asset. That can be a big source of family strife—even for families who aren’t wealthy. A good solution is to set up revocable livings trusts that say exactly how you want your respective and joint assets to be distributed when you die.

Reference: Barron’s (March 2, 2019) “How to Manage Your Money When You’re Remarrying”