If you are in a second marriage or planning another trip down the aisle, it’s vital to review and revise (if necessary) your estate plan. You probably want to provide for your current spouse and not inadvertently benefit your former spouse. And if you have children from each marriage, juggling their interests can be a challenge. Here are a few suggestions.
If you have not yet remarried, but intend to, we recommend that you and your proposed spouse enter into a Pre-Nuptial Agreement setting forth your respective understandings regarding the control that each party will have over his or her own assets both during the marriage and in the event of a divorce or death. This process can take several weeks or even months to accomplish and should not be left to address in the week or two weeks before the wedding date.
Have you updated your will, trusts and beneficiary designations to name your current spouse where desired? Remember that the terms of your divorce may require you to retain your former spouse as a beneficiary of certain pension plans, retirement accounts or insurance policies. It is important following your divorce to review all of your beneficiary designations.
Next, assess your financial situation and think about how you want to provide for various family members. For example, do you want to provide for all children equally? Will you favor biological children over stepchildren?
Also, are children from your first marriage significantly older than children from your second marriage? If so, their needs likely will be different. For example, if children from the first marriage are college age, in the short term they may need more financial support than children from your current marriage. On the other hand, if your older children are financially independent adults, they may need less help than your younger children.
Trusts generally avoid probate, so your assets can be distributed efficiently and without probate court involvement. However, if you leave your wealth to your current spouse outright, there’s nothing to prevent him or her from spending it all or leaving it to a new spouse, effectively disinheriting your own children. To avoid this result, you can design a trust that provides income for your current spouse while preserving the principal for your children.
Trusts are particularly valuable if your children from a previous marriage are minors. Generally, if you leave assets to minors outright, those assets must be held in a conservatorship until the children reach the age of majority (i.e., 18 years old in Michigan). It’s likely that your former spouse will be appointed a conservator, gaining control over your wealth. Even though your former spouse will be obligated to act in your children’s best interests and will be supervised by a court, he or she will have considerable discretion over how your assets are invested and used.
To avoid this situation, consider establishing trusts for the benefit of your minor children. That way, a trustee of your choosing will manage the assets and control distributions to or on behalf of your children.
If you’re contemplating a second or third trip down the aisle or have recently wed for the second or third time, contact us for help reviewing and, if necessary, revising your estate plan.