Have you heard of the “Great Wealth Transfer?” It’s the period when Baby Boomers are projected to pass trillions of dollars to the next generation. Creating or updating an estate plan to protect family wealth from the third-generation curse requires communication between generations centered on the values leading to wealth creation and a financial education on how to preserve and grow wealth.
The anticipated $84 trillion expected to be bequeathed to Generation X, Millennials, and Gen Z beneficiaries sounds enormous, but the third-generation curse may leave heirs with far less than expected. Often, wealth is earned by one generation, grown by the second generation who witnessed firsthand how hard their parents worked to maintain their wealth, and mismanaged or wasted by the third generation members, who are too far from the original wealth creation to respect it.
Many estate plans are structured to address tax planning, but that’s only one aspect of estate planning. Communicating the “why” of the estate plan, including where the money came from, how it has been stewarded over the years, and what needs to happen to protect it, will help beneficiaries have a deeper regard for their inheritance.
Boomer values may differ from their heir’s values, but they may also be similar, as they use different language to describe the same thing. Clarifying these values and communicating with heirs may help to give context to their inheritance and its importance.
Understanding your priorities and values should ideally lead to an estate plan reflecting your wishes. For instance, if the family prizes education, your estate planning attorney may advise you to create a trust to fund advanced education. Such a trust should be accompanied by a letter of intent explaining your wishes and values to both trustees and heirs.
If you’re unsure about mandating the use of funds, you may have your estate planning attorney create a discretionary trust with a similar letter explaining what you’d like them to use the funds for and why it’s important to you. Because circumstances change, the trustee will have the flexibility to distribute the funds as they see fit.
Creating or updating an estate plan to protect your family wealth from the third-generation curse will give everyone the peace of mind they crave. When the estate plan is completed, have a series of conversations with family members about what’s in the plan and why. They don’t need to know every detail, but broad strokes will go a long way in letting them know what you’ve done, your wishes, and your hopes for their future. If you would like to learn more about planning for future generations, please visit our previous posts.
You are a father whose son is getting married. You want to provide a wonderful wedding gift that your son and his bride will cherish and enjoy. Do you pay taxes on wedding gifts? A generous gift for a child’s wedding doesn’t necessarily cause a tax problem unless your lifetime gifts are over the lifetime exclusion limit, which is extremely high right now. A recent article from Yahoo! Finance,“Do I Need to Worry About the Gift Tax If I Pay $60,000 Toward My Daughter’s Wedding?” says most Americans won’t have to worry about the gift tax.
In 2024, the lifetime exclusion is $13.61 million per person and $27.22 million for a married couple. Unless you’ve gone above and beyond these limits, you can make as many gifts as you like to anyone you choose without worrying or paying the 18% to 40% federal gift tax.
But there’s one thing to remember: if you make a gift over the annual gift limit, which is $18,000 per person in 2024 or $36,000 for a married couple, you need to send the IRS Form 709. The form should be submitted even if no gift taxes are due. It’s a simple and smart move.
How do gift taxes work? The federal gift tax doesn’t come into play often. Most gifts are tax-free simply because of the size of both the annual and lifetime gift exclusions. You can gift freely if you keep the limit in mind.
The lifetime exclusion for gift and estate taxes is so high right now that few Americans need to worry about it. If you are generously minded, you may gift $13.61 million (individual) and $27.22 million (married couple). The lifetime exclusion is just as it sounds: the number of gifts you may give during your life or as part of your federal estate.
If you are charitable-minded, you may make many contributions. There are no gift taxes levied on charitable donations, gifts to spouses or dependents, or gifts to political parties. As long as you pay directly to the institutions, there are no taxes on college tuition or healthcare expenses.
There are some strategies to manage the gift tax. One would be to split your $60,000 gift between your daughter and her fiancé. Both gifts would be under the 2024 $36,000 per person exclusion, assuming you are married, so there would not be a gift tax.
Another tactic is to spread the gift out over a few years. Let’s say you’re a single parent. You could gift your daughter and her fiancé $15,000 each this year and next, keeping you below the $18,000 annual gift tax exclusion.
If you’ve already given a gift of $60,000 to your daughter and made gifts over and above the $13.61 million lifetime exclusion, speak with your estate planning attorney to determine where you fall in the gift tax brackets and how much you’ll need to pay.
The easiest way to avoid gift taxes is to pay the vendors directly, but this depends on your overall situation. For instance, where is the money coming from—tax-deferred accounts or investment accounts? It would be wise to talk with your estate planning attorney before making a large gift. Do you pay taxes on wedding gifts? If you have a wedding coming up and are concerned about gift taxes, you can pay the vendors directly rather than giving money directly to the happy couple. If you would like to read more about the gift tax, please visit our previous posts.
Married couples looking to secure their financial future and provide for the surviving spouse tax-efficiently may consider a marital trust. This article will provide an understanding of marital trusts, how they work and their role in an your estate plan.
A marital trust is a legal arrangement in estate planning used predominantly by married couples. It is designed to provide financial benefits to a surviving spouse and can be a crucial part of an estate plan. Marital trusts ensure that upon the death of one spouse, the surviving spouse receives assets held in the trust. This arrangement not only offers financial security but also involves estate tax considerations.
In an estate plan, a marital trust comes into play upon the death of the first spouse. It’s created to transfer assets to the surviving spouse in a manner that is often exempt from immediate estate taxes, thanks to the unlimited marital deduction. This mechanism allows the surviving spouse to utilize the trust assets and potentially the income generated by these assets.
The unlimited marital deduction is a key component in how marital trusts operate. It allows for the transfer of an unrestricted amount of assets to the surviving spouse without incurring federal estate tax at the time of the first spouse’s death. This exemption is a significant advantage of using a marital trust in estate planning.
There are several types of marital trusts, each with specific features and benefits. A commonly used type is the Qualified Terminable Interest Property (QTIP) trust, which allows the first spouse to control how the trust’s assets are distributed after the death of the surviving spouse. Another type is the B Trust or credit shelter trust, which can help maximize estate tax exemption limits.
A marital trust offers numerous benefits to a surviving spouse. It ensures that the spouse can access trust assets and income, providing financial security. The trust can also stipulate how assets are managed and distributed, offering a layer of control and protection over the family’s financial legacy.
Estate tax plays a crucial role in the functioning of marital trusts. By utilizing a marital trust, you can defer the federal estate tax until the death of the surviving spouse. This deferral can result in significant tax savings, especially if the estate exceeds the federal estate tax exemption threshold.
While marital trusts offer many benefits, there are downsides to consider. One such drawback is their irrevocable nature; once established, the terms are generally set and cannot be easily altered. The surviving spouse’s estate may also be subject to increased estate taxes upon their death, depending on the trust’s structure and the value of the assets.
Establishing a marital trust involves careful planning and legal expertise. Consulting with an estate planning attorney will provide an understanding of martial trusts and ensure that the trust aligns with your estate plan. Staying informed and periodically reviewing your estate plan with an attorney is advisable to ensure that it continues to meet your objectives and complies with current laws.
There are different types of spousal trusts, each designed for specific situations and objectives. Apart from marital trusts, other options include Spousal Lifetime Access Trusts (SLATs) and bypass trusts, each offering unique advantages and serving different estate planning goals.
In conclusion, understanding marital trusts are a versatile and powerful tool will go a long way in your estate plan. They offer financial security for the surviving spouse and tax advantages and can be tailored to suit individual estate planning needs. If you would like to learn more about marital trusts, please visit our previous posts.
One of the many aspects of a professionally created estate plan involves employing strategies to avoid inheritance disputes. Your estate planning attorney has various tools, from creating a revocable living trust to drafting a detailed and legally sound will, as outlined in the article “6 Estate Management Strategies to Avoid Inheritance Disputes and How to Implement Them” from Legal Reader.
Creating a revocable living trust and placing assets in the trust allows those assets to be passed to heirs directly and according to the instructions you provide in the language of the trust. Assets not in the will need to pass through the probate process, where those involved in the estate plan might need to attend lengthy and stressful court proceedings. In some jurisdictions, the court may require the presence of all heirs and even estranged family members who were not properly disinherited.
In the probate process, beneficiaries can air grievances if they are unhappy with the inheritance agreement and could potentially challenge the will. By passing assets via a trust, you can completely reduce or avoid the opportunity for these disputes to occur.
The foundation of a successful estate plan is a will created with an experienced estate planning attorney. A will is a legally binding document outlining how the decedent wanted their assets and property distributed upon death. The estate planning attorney will work with you to ensure the language in the will is extremely specific and leaves no room for interpretation.
Some assets pass through beneficiary designations, including life insurance policies, retirement, investment, and bank accounts. To avoid problems with these financial assets, regularly review and update beneficiary designations to avoid giving someone no longer in your life a generous gift. These should be reviewed anytime a significant life event occurs, like marriage, divorce, birth or death, changes in financial circumstances, or when you acquire new assets.
A prenuptial agreement can mitigate the risk of inheritance disputes by establishing specific terms and conditions in the event of a divorce. They are particularly important in states where the courts can divide property acquired during the marriage regardless of where the assets came from. By drafting documents explicitly declaring intentions about the treatment of inherited assets, you provide an additional layer of protection to assets in case of divorce. The process also fosters communication between parties to assist in clarifying expectations for the future.
A well-drafted no-contest clause can diminish the likelihood of legal battles among heirs and challengers. It helps dissuade disgruntled beneficiaries from pursuing costly litigation by putting any inheritance at risk if they should decide to pursue what they feel are unfair distributions. It is imperative to engage an experienced estate planning attorney licensed to practice law in your state to have an effective no-contest clause in a will or a trust.
In some situations, liquidating non-cash assets like real estate makes the most sense. It’s far easier to divide cash than proportions of real estate. However, a buyout arrangement can be implemented if one sibling wants to purchase the property. Beneficiaries could buy out each other’s shares if there’s more than one heir, eliminating the need to sell the asset.
By employing strategies to avoid inheritance disputes, you can ensure your will clearly articulates your wishes. If you would like to learn more about inheritance issues, please visit our previous posts.
An increasing number of couples at various stages of life are choosing to live together without marrying, making estate planning a bit more challenging. This is especially true when considering estate planning for unmarried senior couples, according to a recent article from Kiplinger, “Estate Planning and the Legal Quirks of Retiree Cohabitation.”
From one perspective, living together without being legally married provides an advantage: you have your own estate plan. You may distribute assets after death with no obligation to leave anything to a partner or their biological children. In many jurisdictions, the law requires spouses to leave a significant portion to their surviving spouse. This doesn’t apply if you’re cohabitating.
However, there are downsides. For example, a surviving unmarried partner doesn’t benefit from inheriting assets without estate taxes. A non-spouse transferring assets may find themselves generating sizable estate or income taxes. To avoid this, your estate planning attorney will discuss tax liability strategies.
Owning real property together can get complicated. Consider an unmarried couple buying a property solely in one person’s name, excluding the partner to sidestep any possible gift taxes. If the sole owner dies, the partner has no claim to the property. The solution could be planning for property rights in the estate plan, possibly leaving the property outright to the partner or in trust for the partner’s use throughout their lifetime. It still has to be planned for in advance of incapacity or, of course, death.
Regarding healthcare communication and directives, special care must be taken to ensure that the couple can be involved in each other’s care and decision-making. By law, decision-making might default to the married spouse or kin. Without a designated healthcare proxy, a cohabitating partner has no legal authority to obtain medical information, make medical decisions, or, in some cases, won’t even have the ability to have access to a hospitalized partner. A healthcare power of attorney is essential for unmarried couples.
For senior couples living together, blending families can be challenging. However, blending finances can be even more complex. Living together later in life can create many concerns if there are former spouses or children from a prior relationship. If a senior decides to marry, they are advised to have a prenuptial agreement so children from previous unions are not disinherited. If a potential spouse has big issues signing such a document, it should raise a red flag to their motivation to marry.
Living together without the legal protection of marriage is an individual decision and may be seen as a means of avoiding legalities. However, it needs to be examined from the perspective of estate planning for the unmarried senior couple, to protect both parties and their families. Couples must prepare for the future, for better or worse, in sickness and health. If you would like to learn more about estate planning for unmarried couples, please visit our previous posts.
Marital trusts help protect blended families from complicated family dynamics. Understanding marital trusts is crucial for couples looking to secure their financial future and provide for the surviving spouse tax-efficiently. This article is a guide to marital trusts, how they work and their advantages and disadvantages. With the potential to safeguard assets and ensure that they reach the intended beneficiaries, marital trusts can be an effective part of a comprehensive estate plan, particularly for those in a second marriage or a blended family.
What Is a Marital Trust?
A marital trust is a type of irrevocable trust and is crafted to benefit the surviving spouse. It allows for the managed distribution of assets, potentially safeguarding against financial imprudence or external influences.
Consider that while many couples are just fine with everything going to the surviving spouse directly and outright after one spouse dies, in some cases, there may be concerns related to the surviving spouse not being able to manage the money effectively. What would happen to the money if the surviving spouse is not good with money or is vulnerable to financial predators? Perhaps giving the entire estate outright to the spouse would run the risk that all of the money would be spent irresponsibly. A marital trust allows for both tax benefits and protections for the couple’s estate to prevent these issues from happening.
How Do Marital Trusts Work?
There are three parties involved in setting up, maintaining and ultimately passing along the trust, including a grantor, who is the person who establishes the trust; the trustee, who’s the person or organization that manages the trust and its assets; and the beneficiary. That person will eventually receive the assets in the trust once the grantor dies. The surviving spouse must be the sole beneficiary of a marital trust. Once the surviving spouse dies, the assets in the trust typically pass to surviving children. A marital trust also involves the principal, which are assets initially put into the trust.
How Do Marital Trusts Assist Blended Families?
For blended families, using a marital trust is becoming more popular as a means to help protect assets to a surviving spouse, and the inheritance of children from previous marriages. If one or both spouses in a second marriage have children from a prior marriage, both spouses typically want to ensure that their kids get an inheritance at some point in the future. While most married couples prioritize their spouse as the primary beneficiary, after the surviving spouse passes away, if the couple’s estate plan gives everything directly to the surviving spouse, that arrangement would run the risk that the children from a prior marriage of the deceased spouse would be cut off from receiving an inheritance.
While couples want to assume that a surviving spouse will protect the rights of children from their spouse’s previous marriage, without legal safeguards, the estate of the surviving spouse can be changed to cut out individuals named as beneficiaries after their spouse’s death. Having a marital trust for the surviving spouse ensures that this change can’t happen.
What Are Other Situations in Which a Couple Should Consider Using a Marital Trust?
Additional situations in which a couple might consider using a marital trust include wanting to prevent undue influence of an outside person or party over the surviving spouse. This usually is a concern for older couples when the surviving spouse is in declining health or may have early onset of dementia, and there’s a concern they may be vulnerable to being taken advantage of financially. Another motivation for a marital trust includes a spouse who has an addiction that prevents them from making sound financial choices.
Did Actor Tony Curtis Disinherit His Children Due to Undue Influence?
In 2010, when Actor Tony Curtis died, his five children were left out of their father’s inheritance in a last-minute decision shortly before his death, notes MoneyWise article, “Hollywood legend Tony Curtis cut his kids out of his will and $60 million fortune when he died. Here’s how to avoid leaving behind messy inheritance disputes.” While Curtis did have a will, he decided to leave the majority of his assets to his fifth wife, Jill, and intentionally disinherit his children. The change to his estate plan came only a few months before his death, which raised suspicions within the family. Some of the Curtis children opened estate disputes in the years following his death to challenge the disinheritance, causing additional pain and separation within their family. If Curtis were subject to the undue influence of his fifth wife, Jill, as some of the Curtis children claimed, then a trust could have protected them from being disinherited.
What Are the Benefits of Having a Marital Trust?
Marital trusts are significant in estate planning for high-net-worth individuals, serving as a tool to minimize the estate tax burden by taking advantage of estate tax exemptions. A married couple can significantly reduce or eliminate estate taxes by utilizing a marital trust.
The surviving spouse can receive income and financial stability from the trust.
Assets are kept in the family, and the inheritance intended for children from previous marriages is protected.
Estate Tax Exemptions with a Marital Trust
One of the most significant benefits of a marital trust is its impact on estate taxes. A marital trust effectively doubles the estate tax exemption for a married couple, ensuring that a more significant portion of their wealth can be transferred tax-free. In the context of the federal estate tax, this can result in substantial tax savings and financial security for the surviving spouse and any other designated beneficiaries.
The Unlimited Marital Deduction in Action
The unlimited marital deduction is a cornerstone of marital trust planning. It allows the first spouse to pass assets to the surviving spouse without incurring estate taxes at the time of the first spouse’s death. This deduction is a critical aspect of marital trusts, ensuring that the income to the surviving spouse provides the necessary financial support without an immediate tax burden.
Are There Disadvantages of Using a Marital Trust?
While a marital trust offers many benefits, it’s essential to consider any limitations or drawbacks, such as loss of flexibility once established.
Once established, an irrevocable trust cannot be easily altered or terminated.
Estate tax exemption is limited based on the federal estate tax threshold.
Marital trusts, like other types of trusts, require that assets be moved into the trust, a process that can be lengthy or overlooked.
Establishing a Marital Trust with an Experienced Estate Planning Attorney
Setting up a marital trust is a complicated form of estate planning that involves several steps, including choosing a trustee to manage the trust assets, determining the terms under which the trust assets will be managed and distributed and ensuring that the couple’s property is held in trust. When couples have complex family situations, including blended families or a spouse with vulnerabilities, a marital trust provides for the financial well-being of the surviving spouse. It also ensures that assets are preserved for future generations.
An experienced estate planning attorney can help a couple assess if a marital trust is the right instrument to help protect their blended family as a part of a comprehensive estate plan. If you would like to learn more about planning for blended families, please visit our previous posts.
Houses make for horrible wealth transfer vehicles. Bequeathing a house can mean passing along financial burdens, red tape, home maintenance responsibilities, potential family conflict and housing market volatility, says Kiplinger’s recent article, “Your Home Would Be a Terrible Inheritance for Your Kids.”
Communication about plans is critical. A study from Money & Family found that 68% of homeowners plan to leave a home or property to heirs. However, 56% haven’t told them about their plans. That will surprise the recipients who may or may not want or be able to service an inherited home.
Suppose you bequeath a house to an heir or heirs. In that case, they’ll have to make an immediate plan for home maintenance, mortgage payments (if necessary), utilities, property taxes, repairs and homeowners’ insurance. Zillow says this can amount to as much as $9,400 annually, not including mortgage payments.
The psychology of the home. Owners often have deep emotional attachments to their homes. Therefore, when people gift their homes to children and heirs, they’re not just giving an asset — they’re endowing them with all the good memories that were made on that property. Emotional connections to the home can be nearly as powerful as a strong attachment to a living being.
Beneficiaries may struggle to make practical choices about the inherited property because of the home’s sentimental value. This emotional aspect can cloud judgment and hinder the effective management and allocation of assets.
The financial burdens and family conflicts for beneficiaries. Inheriting a home entails a range of financial responsibilities that can quickly add up.
Property taxes, insurance premiums, ongoing maintenance costs and unexpected repairs can strain beneficiaries’ financial resources dramatically. If beneficiaries already have their own homes, inheriting an additional property can exacerbate financial burdens and potentially hinder their own financial goals, retirement plans and aspirations. The passing of a family member can also sometimes lead to conflicts among heirs, potentially exacerbating existing fractures in relationships among siblings and other family members. These are just a few reasons why houses make for horrible wealth transfer vehicles.
According to a 2018 study, nearly half (44%) of respondents saw family strife during an estate settlement. Disagreements can cause tension, strain relationships and even result in lengthy legal battles. If you would like to learn more about managing real property in your estate planning, please visit our previous posts.
Not using specific names and terms open to definition could significantly impact who might inherit from your estate or trust. The complexities of determining who is a descendant can make beneficiary distribution more difficult. There are situations where some people may choose to deliberately restrict or expand the definition of the group, which might be included in these definitions, explains the article “Who Is Your Descendant: Intentional Limitations Or Broadening Of Definitions In Your Will Or Trust” from Forbes. For some people, creating a new role of a special trust protector who holds a limited or special power of appointment to determine who should be included or removed from the definition of “issue” or descendant is worth considering.
What might arise if the wish only considers children descendants if they belong to a particular faith? Is this type of legal restriction permitted? Clauses limiting heirs to members of a particular faith or a sect within the faith may raise questions about the constitutionality of the clause. Potential heirs excluded under such provisions have argued that a religious restriction on marriage violates constitutional safeguards under the Fourteenth Amendment protecting the right to marry.
Courts have held clauses determining if potential beneficiaries qualify for distributions based on religious criteria enforceable, if the potential beneficiaries have no vested interest in the assets. Another court upheld the provisions of a will conditioning bequests to their sons as long as they married women of a particular faith.
These decisions are narrowly tailored to the specific fact patterns of the cases, since individuals are generally allowed to disinherit an heir with the exception of a spousal elective share or a community property interest. The courts have reasoned that the restriction is not on the heir to marry but on the right of the testator to bequeath property as they wish.
An alternative approach to addressing the complexities of determining who is a descendant is to create a single trust for all heirs, mandating the funds in the trust be used for the cost of religious education, attending religious summer camps, taking relevant religious studies, religious institutional membership, etc. The trust could use the assets to encourage religious observance. However, it may only partially address the question. What about the remainder of the assets—should it be used for all heirs regardless of religious affiliations?
An estate plan compliant with Islamic law may involve a different determination of who is a descendant. The Sharia laws of inheritance are similar to the intestacy statute. One-third of the estate may be distributed as the decedent wishes. However, the remainder must be distributed as mandated under Islamic law. The residuary inheritance shares after the first third are restricted to Muslim heirs. Additional laws prescribe specified shares of the estate to be distributed to certain heirs, depending upon which heirs are living at the moment of the decedent’s death.
Suppose you or a family member is lesbian, gay, bisexual, transgender, or queer (LGBTQ). The law may not address the unique considerations regarding who may be considered a descendent. Special steps may be needed to carry out your wishes as to who your descendants are. What if you view a particular child as your own, but share no genetic material with a child? Children may be adopted or born through surrogacy, so neither parent nor only one parent is biologically related to the child. While some states may recognize an equitable parent doctrine, this may be limited and not suffice to protect the testator.
The many new complexities of determining who is a descendant are complicated and evolving. Changing family structures and religious beliefs based on different values all impact estate planning. A special trust protector may make decisions when uncertainty arises from provisions in a will designed to carry out the wishes. This is a relatively new role and not permitted in some states, so speak with your estate planning attorney to protect your wishes and heirs. If you would like to learn more about beneficiary designations, please visit our previous posts.
Multigenerational planning is common today, where grandparents, parents, and children live in the same home. Estate planning issues can arise in multigenerational homes where grandparents, parents and children all reside, as explained in the recent article from Kiplinger, “How to Handle Estate Planning for Multigenerational Living Arrangements.”
For instance, if a grandparent pays for a separate apartment on their child’s property, who owns the apartment? What if an adult child living with elderly parents pays for updates on the property or provides caregiving services to the parents? Should these arrangements lead to unequal inheritances? All of these issues can be addressed through estate planning.
The first issue to address is home ownership. Should the title be taken jointly, as tenants in common, with a life estate, in trust, as a family partnership, or in some other manner? Which family members are allowed to live in the home? And again, how will this arrangement impact inheritances?
For many families, using a trust to detail all aspects of use and ownership is the best solution. The trust document can address everything, including the right of first refusal, language governing who has priority to buy the property upon the death of the parents, equalization language between beneficiaries to account for gifts to certain family members during life, and tax provisions to ensure beneficiaries pay applicable taxes, equally or proportionally.
The trust may also be used to address the incapacity or death of a family member and what will happen to the property for future generations. The level of detail can be extremely important when dealing with multigenerational shared real estate purchases and uses.
For some families, an LLC (Limited Liability Corporation) or LLP (Limited Liability Partnership) allows for easier fractional property ownership. LLCs and LLPs also help with asset protection and maintaining privacy.
An LLC operating agreement specifies which members will be in charge of the daily operation of the property, payment of expenses, and how ownership interests are divided. Intrafamily loans can be leveraged to pay for improvements on the property, and the agreement can be used to address many different scenarios for the family.
If one child provides care for an aging parent, or a grandparent provides regular daycare for working parents, should these arrangements be monetized and factored into the estate plan? What about a sibling who does not live in the home and does not provide any care for elderly parents or young children? There is no one answer for these or the many other situations arising from multigenerational living arrangements.
An experienced estate planning attorney can ensure your documents align with your wishes and address these estate planning issues in unique, multigenerational homes. Often, having a professional in the room when mapping out a plan can alleviate some family dynamics, making these matters less emotional. If you would like to learn more about estate planning for large, multigenerational families, please visit our previous posts.
Second marriage, goes the saying, is the triumph of hope over experience. It’s a happy event for everyone, but different from the first time around. You might have created an estate plan during your first marriage. Still, chances are your life is a lot more complicated this time, especially if you both have children from prior marriages and more assets than when you were first starting out as a young adult. It is important to evaluate your planning before a second marriage. This is why a recent article from The Bristol Press is aptly titled “Plan your estate before you remarry.”
Here are some pointers to protect you and your new spouse-to-be:
Take an inventory of all assets and liabilities. This includes assets and debts, life insurance policies, retirement plans, credit card debt and anything you own. It’s important to be open and honest about your debts and assets, so that both people know exactly what they are marrying. Once you are married, you may be liable for your partner’s debts. Your credit scores may be impacted as well.
Decide how you are going to handle finances. Once you know what your partner is bringing to the marriage, you’ll want to make clear, unemotional decisions about how you’ll address your wealth. Are you willing to combine all of your assets? Do you want to keep your investment accounts separate?
For example, if one person is selling a home to move into the home owned by the other person, what costs, if any, will they contribute to the cost of the house? If one person has significant debt, do you want to combine finances or make joint purchases? These are not always easy issues. However, they shouldn’t be ignored.
Decide what you want to happen when you die. You and your future spouse should meet with an experienced estate planning attorney to create a will, Power of Attorney, Health Care Proxy and other documents. This lets you map exactly where you want your assets to go when you die. If there are children from prior marriages, you’ll want to ensure they are not disinherited when you die. This can be addressed through a number of options, including creating a trust for your children, making them beneficiaries of life insurance policies, or giving children joint ownership of property.
Even if there are no children, there may be family heirlooms or items with sentimental value you want to keep in the family, perhaps passing to a cousin, nephew, or niece. Discuss this with your future spouse and ensure that it’s included in your will.
Meet with an estate planning attorney. You should take this step even if you don’t have many assets. If you have children, it’s even more important. You’ll want to update your will and any other estate planning documents. If you have significant assets, you may decide to have a prenuptial or postnuptial agreement. The estate planning attorney will also help you determine whether you need a trust to protect your children.
If you had planning done in the past, it is important to sit down with an estate planning attorney to evaluate it in before to a second marriage. If you would like to learn more about estate planning for blended families, please visit our previous posts.
Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
