Cinderella vs. The Brady Bunch: Estate Planning Issues for Second MarriagesMay 19, 2023
The Top 5 Estate Planning Mistakes for Parents of a Special Needs ChildJuly 23, 2023
You’re getting remarried and are excited to begin spending your lives together. You may be combining households, blending families with young or adult children, and are looking forward to a long and happy relationship.
Remarrying later in life can be a joyous occasion, but it can also be a challenging and emotional time. Experience shows that careful planning and clear and open communication can help families smooth out many short-term wrinkles and avoid long-term disasters.
Second marriages can create complicated estate planning issues, especially for wealthy parents who have children from previous marriages. As every estate planning professional knows, when family money is involved, drama isn’t far behind. We’ve all seen how inadequate planning or poorly written documents lead to financially crushing litigation or emotionally devastating battles. Both can destroy previously strong and healthy families.
Therefore, it is crucial for wealthy parents who are getting remarried to take certain steps to ensure that their assets are distributed according to their clear wishes. In this article, we will discuss the top five estate planning tips for well-to-do parents who will be getting remarried.
Create a prenuptial agreement
A prenuptial agreement is a legal document that outlines how assets will be divided in the event of a divorce or death. This agreement can help to protect assets that were acquired prior to the marriage and ensure that they are distributed according to the individual’s wishes.
For wealthy parents who are getting remarried, a prenuptial agreement is essential as it can help to protect assets that are intended for their children from previous marriages. (Cinderella’s financial problems could have been avoided if her father had executed a simple prenup!).
It also provides tangible evidence to the children that their parent carefully considered their needs and took steps to protect them and their future. There are some tricky rules relating to how each party’s assets are treated, so it is important to involve an experienced attorney involved in the drafting of the prenup to ensure that it is legally binding and enforceable. Spend a little up front to do it correctly, and you could avoid tragic lawsuits and heartache later.
Update your estate plan
When getting remarried, it is essential to update your estate plan to reflect your current wishes. This includes updating your Will, Trust, and beneficiary designations. In many cases, a person’s first instinct is to leave their entire estate to their spouse, trusting that they’ll act with love and integrity and treat their new step-children with the same care and devotion that they would have. However, for wealthy parents with children from previous marriages, history shows that this is not always the case (see Cinderella, above).
The better option would be to set up a legally enforceable and binding Trust to ensure that their assets will be distributed in a manner that benefits their children from both marriages however they desire and intend. Better to be safe than sorry.
Consider a life insurance policy
A life insurance policy can provide a guaranteed source of income for your spouse and children in the event of your untimely death or financial adversity. For wealthy parents who are getting remarried, a life insurance policy can help to ensure that their children from previous marriages are taken care of financially. This too is a more reliable source of financial security than the whims of a Fairy Godmother. (If she could abracadabra Cinderella some glass slippers, why not a house?)
In many cases, the life insurance policy can be used to fund a trust that benefits some, or all, of the children. Options vary depending upon the children’s age―and reliability.
When getting remarried, it is important to be transparent and candid with your family about your estate planning intentions. This includes discussing your wishes with your spouse, children, and other family members, so there’s no room for misunderstanding.
By being open and honest, you can help to prevent surprises and disputes after your passing. It is also important to involve your family in the estate planning process to ensure that their needs and wishes are taken into consideration.
Review your estate plan regularly
Estate planning is not a one-time, “set it and forget it” event. It is important to review your plan regularly to ensure that it continues to reflect your wishes. Consider your Will, Trust, and overall estate plan to be living documents that should be tweaked as circumstances change. New laws are enacted regularly that can either create sizable positive financial opportunities or equally sizable negative consequences.
Further, life events like the birth of a child, the death of a spouse, or a new job or other change in financial circumstances can all impact your estate plan. By reviewing your estate plan regularly, you can ensure that it continues to meet your needs and remains legally binding over time.
In conclusion, getting remarried later in life can be a joyful occasion, but it can also be a complex process when it comes to estate planning. For parents who have children from previous marriages, it is essential to take certain steps to ensure that their estate is distributed according to their wishes.
By taking these steps, parents can ensure that their assets are distributed in a way that benefits their loved ones and prevents disputes and legal battles after their passing. It is important to work with experienced professionals, such as attorneys, insurance professionals, and financial advisors, to create an estate plan that meets your specific needs and is legally binding.
Cinderella lucked into a happy ending. Of course, luck is not a strategy; planning would have been dad’s better option.