According to a study by the Pew Research center, four out of every ten marriages are now remarriages. What special issues do remarried couples need to think about when they get married a second time?
Besides the family dynamics, there are all sorts of economic and personal issues they need to think about, such as income taxes, prenuptial agreements, pensions, 401k benefits, Social Security benefits, cost-sharing, and estate planning documents. Let’s focus on one aspect, your estate planning documents.
Let’s use a real-life example. A couple remarried in their 50s. They each had children from their first marriage. The husband died twenty years later. He wanted to provide for his second wife, so his will stated that all his assets went to her with the understanding that upon her death, those assets would revert to his children.
However, after the husband’s death, the surviving wife combined all their assets. On her death, all the money went to her children. The husband’s children were left with nothing.
So, what should he have done? He should have set up what is commonly called a marital trust. The trust would hold the assets for his second wife after his death, but upon the wife’s death, the assets must go back to his children. The trust document prohibits the widow from transferring the assets to her children.
As for other important documents, everyone should have a durable financial Power of Attorney, durable health care Power of Attorney and a Living Will Declaration. Consider whether you want your new spouse to have the authority to deal with your financial affairs or if you plan to keep your finances separate from your spouse’s. A prenuptial agreement may dictate how that is handled. Consider whether you would rather have your children making medical decisions for you. This may include end of life choices, so be careful who you choose.
Additionally, remember that your estate planning documents don’t necessarily control the designation of beneficiary on your retirement plans, annuities, or life insurance policies. If you fail to change the beneficiary, your assets may not flow to whom you think. You don’t want your life insurance proceeds to go to your ex-spouse instead of your new spouse or your children! Check and update your documents regularly.
There is no one size fits all concerning remarriages OR updating your estate planning documents. Since more and older Americans face this issue, you need to consult your team: your attorney, accountant, tax planner, other professionals, and, of course, your family.