In first marriages, the couple generally has the same goals when it comes to their estate planning: take care of the surviving spouse for as long as he or she lives, then whatever is left will go to the children. They may own many of their assets jointly and, at the death of the first spouse, more than likely everything will go to the surviving spouse just as they had planned.
But second marriages (after divorce or death of the first spouse) are often different. There may be his children, her children and sometimes their children. Each spouse probably has assets and/or property that they brought into the marriage, and they may desire that some or all of those assets or property be passed on to their respective children or grandchildren. At the same time, they will probably want to make sure the surviving spouse will be provided for and have enough to live on.
More than likely, estate planning methods relied upon in the first marriage will not work now. For example, let’s say the husband adds the new wife’s name on the title of his home and they own it as joint tenants with right of survivorship. If he dies first, his share will immediately transfer to his wife, who now has complete ownership of his home. She can do whatever she wants with it now, regardless of what his will or trust says. She can leave it to her children or grandchildren and completely disinherit the deceased spouse’s heirs.
There are similar problems with beneficiary designations. Many people name their spouse as beneficiary of their life insurance, IRAs and other tax-deferred plans to provide for their spouse should they die first. But this can be a problem with second marriages because the spouse-beneficiary can name anyone he or she chooses as new beneficiaries or to inherit the proceeds, bypassing the owner’s children. Promises may be made now to include them, but after one spouse is gone situations can change that cause broken promises.
In many blended families, particularly where each party already has considerable assets, the parties may wish to maintain the assets and estate planning separate. In some cases this may involve a pre- or post-nuptial agreement.
If one spouse in a blended family has considerably fewer assets than the other, it is possible for provide for this spouse until death or remarriage, then have the remaining assets distributed to the children of the deceased “wealthier” spouse. If the new spouse is much younger in age, and closer in age to the children, some parties will distribute some upon the parent’s death, with the remainder at the surviving spouse’s death or remarriage.
Estate planning for second marriages may also include provisions for keeping the proceeds from life insurance policies and tax deferred plans in a trust. This will allow the owner-spouse to keep control over how and to whom the proceeds are distributed. The surviving spouse can receive lifetime income, yet the owner-spouse can keep control (through the trust) over the rest of the proceeds. This can also serve to protect assets from irresponsible spending, creditors, predators, divorce, remarriage and possibly even taxes.