Estate Planning For Second Marriages 5 Things to Consider
Estate Planning For Second Marriages – 5 Things to Consider
Everyone believes in second chances. Second chances can bring a lot of joy, especially in the context of getting remarried. In fact, blended families now outnumber traditional families, according to the U.S. Census Bureau. This is not just because of rising divorce rates – our longer life spans mean that many more people are outliving their spouses and remarrying. However, second marriages bring with them unique challenges, and the need to have comprehensive estate planning becomes increasingly important. It is likely that in your first marriage, you and your spouse generally had the same goals when it came to your estate planning: taking care of the surviving spouse during their lifetime and then leaving whatever assets remain to your children. Now, not only do you have to take into consideration the needs of your new spouse, you also have to consider the needs of your children from your previous marriage and possibly the needs of children from your second marriage.
- Wills. In Oregon, when a person becomes married, his or her existing will is automatically revoked. So, even if you updated your estate planning documents after your divorce, a remarriage may require you to take a second look at your existing estate plan.
- Beneficiary Designations. Certain assets let you name a beneficiary and are not controlled by a will or trust. These assets include life insurance policies, employer retirement plans, IRAs, annuities, and certain investment and bank accounts. You most likely named your spouse as beneficiary when you were married. Given the fact that you have remarried and may have additional children, updating your beneficiary designations is critical: beneficiary designations will override a will or trust if the documentation isn’t consistent. What does this mean? It means your ex-spouse will receive the assets if he or she is still named as the beneficiary!
- Qualified Terminable Interest Property (QTIP) Trust. A QTIP Trust is a type of trust that can provide for your new spouse until his or her death or remarriage, with the remainder of the assets passing to the beneficiaries of the trust – usually your children (though you can name anyone). The surviving spouse is entitled to the income produced by the trust during their lifetime, but the surviving spouse does not have full ownership of the trust assets and cannot sell them or give them away. In addition, these are special IRS-favored trusts that have special estate tax implications. The benefit of a QTIP trust for a second marriage is that it provides for flexibility in treating beneficiaries, can save assets for children of a previous marriage, and can generate tax savings and deferrals of estate tax in taxable estates.
- Irrevocable Life Insurance Trust (ILIT) . An ILIT is an irrevocable trust that is both the owner and beneficiary of one or more life insurance contracts. An ILIT could be a way to prevent conflict in your blended family because it would provide for an immediate death benefit to whomever you designate as beneficiaries (most likely your children from your first marriage), instead of forcing children to wait for your spouse to die before having access to assets (as is the case with a QTIP trust). Then, the remainder of your assets would be available to your spouse and perhaps children from your second marriage. As an added bonus, because the insurance proceeds are not part of your estate for estate tax purposes, an ILIT is a useful tool to avoid state and federal estate taxes.
- Power of Attorney and Health Care Directive. Now that you are remarried, you want to make sure that you have designated the proper person to make financial and health care decisions for you in the event you become incapacitated. In many cases this will be your new spouse. In Oregon, divorce does not automatically revoke a power of attorney, so failure to update your estate planning documents could cause your ex-spouse to serve as your agent.
Most people think that their situation is “too simple” to necessitate any estate planning. In the case of second marriages, this thinking could not be further from the truth. Estate planning in second marriages presents many challenges and requires the assistance of well-qualified estate planning attorneys to ensure your goals are achieved. Gevurtz Menashe’s estate planning attorneys are well-versed in assisting clients in this area. If you would like to learn more about the necessity of estate planning for second marriages, any one of our estate planning attorneys would be happy to assist you.
Call us at 503-227-1515 or request a consultation online.