Written By:Scott Glatstian
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For decades the divorce rate in America has been higher than in other countries around the world. Second and even third marriages have become commonplace in our society, and with this trend comes new questions about estate planning, especially when there are children from a previous marriage involved.
If you’re in a new marriage and thinking about your future, it’s important to ask yourself some questions. How confident are you that your money and assets will be used to take care of your children should you become incapacitated or pass away? How about your current spouse? Does your divorce preclude you from making certain plans about how your future estate will be distributed?
It’s essential to have a plan in place for what happens to one’s property and finances when they die, especially when one is responsible for two or more families. This article will examine some of the common issues that should be considered when estate planning while in a second marriage.
Divorce Settlement Agreements
If one’s prior spouse is still living, it’s important to initially factor in a Property Settlement Agreement, also known as a Marital Settlement Agreement. Most divorced couples will go through the process of dividing up their shared physical assets (furniture, shared belongings, etc.) and debts. Property Settlement Agreements can be comprehensive, including provisions for child custody, alimony, and other means of financial support.
If one has a preexisting Property Settlement Agreement, it will be crucial to carefully review it prior to moving forward with estate planning for one’s newest marriage. In some cases, Divorce Settlement Agreements can bar a divorcee from making changes to their designated beneficiaries for pre-existing assets. Disregarding or even misunderstanding often complicated Property Settlement Agreements can lead to hefty fines and expensive litigation.
Property settlement agreements can be modified if both parties agree. If there is no mutual agreement, the person creating an estate plan will need to consider ways to navigate around the agreement and still distribute their estate in a manner that aligns with their wishes. Assistance from an attorney will be crucial in navigating any Property Settlement Agreement in a new marriage, particularly if modifications are needed.
Children and Beneficiary Designations
One common complication when dealing with second marriages involves distributing one’s assets to their children, both from the new marriage and the previous one. Many people want to provide for their current spouse if they were to pass away, but don’t necessarily want to give their new spouse full control over how their assets will be distributed if they die, particularly when the estate planner wants to provide for children from a prior marriage.
For example, consider Dave, who is in a second marriage and wishes his estate could be given to his children from both marriages, as well as his current wife. Dave is very particular about how he wants his money to be distributed among everyone. If Dave left his estate to his current wife, how could he be certain she would distribute it according to his wishes?
If Dave were to set up a Qualified Terminable Interest Property (QTIP) Trust, he could avoid this issue entirely. QTIP Trusts allow an individual full control over how their assets are distributed, particularly when intending to provide for a surviving spouse or children. With the assistance of an estate planning lawyer, Dave can set up a QTIP Trust to provide for his current wife while she is alive, and then to distribute the remainder of his estate to all of his children according to his wishes.
Dealing with estate planning for children from multiple marriages can be complex, and if done improperly can result in unintentionally leaving certain parties with no inheritance. It’s best to speak with an experienced attorney prior to creating any estate plan that involves this situation.
Prenuptial and Postnuptial Agreements
Most people would agree that home insurance and health insurance are necessary, because those are two incredibly important and vulnerable elements of life. So why not get insurance on marriage, something just as impactful as health and home ownership? A Prenuptial Agreement (Prenup) functions as insurance on a marriage.
A Prenup allows a couple to reach an agreement over the ownership of their individual assets before marriage. The goal is to create separate estates and can be especially beneficial if one party has dramatically more assets than the other. Postnuptial agreements operate in a similar fashion, creating a legal document that will designate how certain assets are to be handled upon the end of a marriage.
In either case, these agreements may affect a person’s ability to distribute their estate according to their current wishes. When creating a new estate plan after the end of a previous marriage, it’s crucial to have an attorney review all agreements that were entered into with the previous spouse. An experienced attorney will be able to explain what can and cannot be done in an estate plan because of these agreements, and may even be able to offer solutions that will allow a person to work around aspects of the agreement in order to distribute their property how they want.
What if One Decides Not to Have an Estate Plan?
If no will or living trust exists, then a multitude of potentially undesirable results may occur. First and foremost, intestacy, or not having a will at death, will result in the State dictating what will happen to the deceased’s assets. This means that a judge will divvy up remaining assets in a way that may go against the wishes of the deceased spouse.
Alternatively, the surviving spouse will have six months to elect to claim a large percentage of the deceased spouse’s property, typically one-third. This is called a Right of Election, and exists to guarantee that close family members are entitled to a share of the deceased spouse’s assets.
Anyone ending a marriage or entering into a new one should consider creating an estate plan immediately, especially if they have children, as not doing so can lead to a very real possibility of their assets not being distributed to their heirs in the manner that they desire.
Power of Attorney
As we age, incapacitation from illness is a growing risk. When someone falls ill and cannot speak for themselves, the responsibility for making medical decisions on their behalf will fall to someone else. This can lead to fights amongst family members about how someone should be treated. For this reason, it’s crucial to have a plan in place for who is allowed to make decisions on the incapacitated person’s behalf.
A good estate plan will include powers of attorney for both finances and healthcare, which will authorize a specific person or persons to make these decisions if they ever need to do so.
Choosing the right person to take on this responsibility can often be difficult. This decision becomes even more complicated when multiple families are involved. While a power of attorney is revoked once a divorce is finalized, there is a period before the divorce is finalized where someone may not want their soon-to-be ex-spouse having the authority that these documents grant. Anyone getting divorced or already divorced should speak with an estate planning attorney to determine the best plan for addressing how these powers should be granted and to whom, based on their unique circumstances.
Where Can You Go for Help?
While it can be done, navigating estate planning alone is an unwise choice. If the language and processes aren’t precise, an individual runs the substantial risk of legal trouble and expensive litigation. Without an attorney this process can be complicated, time-consuming, and potentially create future legal issues for the person creating the estate plan, as well as their loved ones.
Rosenblum Law makes estate planning easy for its clients by guiding them through the process step-by-step. We offer affordable flat-fee pricing, as well as options for those with more complicated estate issues. No situation is beyond Rosenblum Law’s expertise, no matter how complex. Call us today for a free consultation at 888-815-3649 to get the process started.
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How to Cite Rosenblum Law’s Article
Scott Glatstian (Jul 19, 2022). Read This Before Creating Your Will Online. Rosenblum Law Firm, https://rosenblumlaw.com/read-this-before-creating-your-will-online/
Scott Glatstian "Read This Before Creating Your Will Online". Rosenblum Law Firm, Jul 19, 2022. https://rosenblumlaw.com/read-this-before-creating-your-will-online/