“Love is lovelier the second time around.” Maybe. But not marriage. Second (and later) marriages makes estate planning a lot more complicated – particularly when children are involved. With high divorce rates and record longevity, I’m asked to deal with questions about remarriage often. So what exactly are the issues?
Let’s take a typical example: Bob, a 72-year-old divorced man has two children and four grandchildren. Jane, a widow who is 70, has three children and six grandchildren. Each has a separate home and separate investment, bank and retirement accounts when they fall in love and decide to tie the knot the second time around.
Let’s also assume each has his or her own estate plan in place: a living trust, power of attorney and health care directives naming their respective children as beneficiaries, trustees, executors and health care agents. They come to me prior to the big day and ask my advice on estate planning.
First and foremost, I tell them that if they get married without changing their respective estate plans, the government will make one very important change for them. If one dies without providing for the other as the spouse in the estate plan, the government will assume that the deceased forgot to mention the other by accident, and 30% of the estate will go to the survivor. This is called the Elective Share.
This is the default for failing to do anything, and it is usually not what either person intended. A simple amendment to the estate plan (the trust) after marriage will prevent this. A prenuptial agreement would prevent each from having to leave anything to the other. See below.
Second, if one of them becomes really sick, he or she could end up in a skilled-nursing facility at a cost of $10,000 a month. The one who is ill could be eligible for public assistance, but if he or she gets married, the other person’s assets count toward eligibility, a possible disqualifier for public aid.
Spending down one’s assets to qualify for public assistance gets more complicated when two spouses’ combined assets are involved. If the couple merely lives together without getting married , the sick one does not put the other’s assets at risk when qualifying for public aid. Sadly, this is an argument for not getting married the second time around.
Third, I advise each person to review his or her current estate plan. If the newlyweds want to leave everything as is – keep assets separate, leave all to respective kids, etc. – they still need to amend their trusts to state that they are now married and intentionally not providing for one another.
Even if the lovebirds intend to keep current plans in place, they likely will want to amend advanced health care directives and medical release forms.
If the couple intends to sell one of the homes and keep and live in the other, they may want to allow the non-owner spouse to continue living in the home after the owner’s death. This can be done in several ways: a life estate, a term of years, an occupancy agreement or a residence trust. Each has a specific purpose, and each provides that the heirs of the first to die will eventually inherit the house.
With retirement accounts, if one spouse intends to exclude the other from receiving proceeds, the new spouse must consent to any beneficiary other than himself or herself. Disposition of other assets can be planned in several ways, taking into account the competing interests of the new spouse and any children.
Fourth, we talk about prenuptial agreements. A must if you insist on getting married. It won’t solve all the problems discussed (the Medicaid people ignore them) but it goes a long way to keeping things separate.
Last, should you involve your adult children in reviewing your estate plan, and if so, to what extent?
Children are seldom involved in the actual planning process for younger people but for seniors they are often part of the process.Kids should be told what their duties and responsibilities will be when the time comes, as opposed to being surprised or shocked later at the roles each was assigned. Each situation is different and this is an important part of our discussion.
A final note: Please discuss these issues with our office before you take the plunge so you can at least make an informed decision and weigh all the options carefully.
