In the United States, 60% of couples in a second or subsequent marriage have at least one child from a prior relationship. In 2008 one-third of people divorcing were actually re-divorcing (divorcing again).
In blended families, it is important to make sure the children from your first marriage are not unintentionally disinherited. To make sure your intentions are met, second marriage inheritance issues should be addressed before or immediately after your marriage.
Estate Plans Must be Updated
Often in second marriages you and your spouse are older and may already have a will and trust. Those items need to be updated each time you remarry.
Blended families are common. There are special considerations that need to be considered in estate planning. You and your spouse may have children from prior relationships, expenses or income from child support or alimony, joint property with a former spouse, and retirement investments.
Updating your estate plan will prevent inheritance problems. Whether to combine estates from prior relationships or keep them separate will be one of the decisions you need to make. It is important to talk to an estate attorney before you combine any assets.
Common Second Marriage Inheritance Issues
In second marriages inheritance issues become more complicated. There is a high failure rate for second and third marriages. 50% of first marriages, 67% of second marriages, and 73% of third marriages end in divorce.
When you consider 3 out of every 4 divorced people will remarry, inheritance issues and proper estate planning are critical. If you die before your spouse, your spouse could remarry and leave everything to their own children. This would eliminate your first marriage children from receiving any inheritance. Special consideration must be given to each individual factor in inheritance planning.
The first decision is whether to combine estates or keep them separate. Assets made joint provides your new spouse with entitlement to that asset. Assets kept separate may be designated for children of your first marriage.
Income and property obtained during a marriage are considered community property. Income and property obtained prior to the marriage and never comingled remain your sole property.
If your assets have been comingled your spouse will inherit 100% interest in the house, bank accounts, stock accounts, etc. In most cases, the second spouse changes everything and leaves assets to their own children, nothing to the spouse’s children.
Long-Term Care Considerations
In many states spouses have a legal obligation to support each other. If one spouse needs long-term nursing home care the assets of the other may be used to pay bills. This could include personal income and draws from an IRA. In other states, the income and IRA of the spouse may not be affected.
You may want to seek legal advice before deciding to tie-the-knot. It may be financially better to become partners rather than getting married.
You must update beneficiaries on investments and life insurance. The beneficiary designations on these documents supersede anything you put in your will. If your life insurance still lists your ex-spouse as a beneficiary and your will lists your new spouse, the beneficiary designation holds and your ex-spouse will receive the payment.
At the same time, if all of your life insurance and investments have your second spouse listed as a beneficiary, they will inherit everything and your children from your first marriage receive nothing.
401(k), IRA and Financial Investments
The older you are when you remarry the more likely it is you and/or your new spouse will bring assets into the marriage. This may include retirement savings, life insurance, brokerage accounts, and real estate.
401(k) plan rules require the current spouse to be the beneficiary unless he or she legally agrees not to be designated. On all other investments, you may designate who you want to inherit the money. This is an excellent way of ensuring your children receive a financial inheritance from you.
Bank accounts or brokerage accounts held jointly with a child will go to that child upon your death. An IRA goes to the person named as a beneficiary on the account.
Family Heirlooms and Memorabilia
You may be in possession of family heirlooms and memorabilia that are important to your children but are not of any significance to your current spouse. Specifying how those items are distributed in your will or trust will guarantee they are distributed according to your wishes.
Houses Owned Prior to Marriage
If you owned a home prior to your second marriage and your spouse is going to move in, consider whether or not you want that home to eventually go to your children. If you add your spouse to the title, they will inherit the home upon your death and your children get nothing. The title of the home supersedes anything you put in your will.
One consideration is to keep the home in your name only but set up a trust that allows your spouse to reside in the home until their death. When your spouse dies the home will pass to your children.
Medical Power of Attorney
Should something happen to you, who do you want to be able to make medical decisions on your behalf, your children or your spouse? Make sure both your spouse and adult children know your intentions and the appropriate documents have been completed.
The Purpose of Estate Planning
Estate planning legally ensures your assets end up where you wanted them to. If you fail to plan, the children from your first marriage could be unintentionally disinherited.
If you die intestate (without a will) the courts will decide where your assets go. If there is no will or trust and you are married, all your assets will pass to your spouse.
Consider a Prenuptial Agreement
You may want to meet with an attorney prior to your second marriage to discuss having a prenuptial agreement prepared. More than 40% of weddings have a bride or groom that was previously married. This will provide you and your spouse with full financial disclosure of the assets and debts of the other.
The agreement lays out in a legal contract what happens to your assets in the event of divorce or the death of the other person. You may want to make sure your adult children have a copy of this agreement, as their inheritance may depend on it.
Make Sure Your Inheritance Goes Where You Want
The majority of children born to married couples are born during the first marriage. Many couples in a second marriage do not have common children, so there is no desire to preserve the family.
Make sure you speak with a legal professional about second marriage inheritance issues. Take this important step now.