MANAGING THE COMPLEXITIES WITH EASE
After the bliss of walking down the aisle for a second (or third) time fades, you’re faced with the task of combining two established households, financial situations, and lifestyles. A garage sale and some give-and-take can solve the dilemma of duplicate toasters and who gets which side of the bed, but when it comes to estate planning and personal assets, it’s a little trickier than just flipping a coin.
WHAT IS FAIR IN A SECOND MARRIAGE AND ESTATE PLANNING?
In a second marriage, each partner typically brings something to the marriage that differs from the first trip down the aisle. Careers have been established, children may have come into the world, inheritances have been granted and other financial concerns need to be taken into consideration when discussing end of life care and estate planning.
- Which assets will you each continue to hold individually?
- Are either of you bringing any debts into the marriage?
Since Louisiana is a community property state, all assets acquired by the spouses before marriage are considered separate property while all assets and income after are community property. Conduct an inventory of all your assets and liabilities to assist in the marriage estate planning. This inventory should include financial accounts, investments, savings and checking accounts, real estate and personal assets, pensions and tax deferred retirement accounts.
CHILDREN AND INHERITANCES
Since both spouses may be contributing different assets to the marriage, it is important to decide how these assets will be divided. Certain assets may need to go specifically to the respective children, while others may be held to ensure that the surviving spouse will have enough income to maintain a similar quality of life.
- What assets will be left to each of your children?
- Do you plan to have additional children together and if so, what assets will be allocated to them?
A marital trust can be common in estate planning for passing on assets in order to minimize potential for conflicts. This allows you to ensure that your spouse and children both receive their intended share of the assets while allowing you to more easily manage estate and inheritance taxes.
Beneficiaries for life insurance policies and retirement accounts is probably the step in estate planning that most people will already be familiar with, but when it’s a second marriage, the spouses will need to update their respective accounts with the name of the new beneficiary, whether it is their spouse or one of the children.
- Do each of you have a will in place that needs to be updated or will you establish a joint will?
- Are there any assets that will be held in both of your names, such as property or bank accounts?
Following the death of a loved one, emotions can lead to forgotten promises, so detailing your estate plan can help you to avoid potential conflict and even legal issues. This is another situation where it is advisable to name a trust as beneficiary for life insurance policies and retirement accounts. This allows the spouse to maintain control over how and to whom assets and income are distributed.
Whether or not there is a large gap between spouses, long-term care should be a part of every couple’s estate planning process. Payment for care can become contentious when it reduces the assets left behind or causes financial difficulties for the surviving spouse. Many choose to protect their assets with specific long-term care insurance.
- Besides a will, have you set up an advance healthcare directive or power of attorney?
An advanced healthcare directive and a power of attorney can ensure that, in the event you are unable to make financial or medical decisions, your wishes are carried out in end-of-life situations. It is also important to confirm that you have sufficient life insurance to provide for your spouse and children. When there is a disparity among incomes, each spouse may choose to hold their own policy, or multiple policies may be desired to ensure that you have ample coverage.
The services of an estate planning attorney can help you navigate the process of creating the necessary wills, trusts, and other legal documents that allow your loved ones to fully understand your last wishes. The Law Office of Michael A. Rosenblatt is here to help you understand the complexities of estate planning, protecting your rights and ensuring that your family members are looked after following your death.