When beginning a second marriage, it’s important to revisit your financial and estate planning to make sure that your assets are in order according to your wishes. In this article, we’ll cover important estate planning considerations as you enter your second marriage.
- When updating an estate plan for a second marriage, you’ll need to address the division of assets between a surviving spouse and children from previous relationships. Trusts are a great tool for ensuring assets are passed on according to your wishes.
- Review and update designated beneficiaries, powers of attorney, life insurance, and other estate planning documents.
- You may want to consider prenuptial or postnuptial agreements as a means of allowing both spouses to safeguard financial assets in a second marriage.
How to Review and Update Your Estate Plan for a Second Marriage
Your wills and estate plans will need to be updated upon entering a second marriage.
Questions to Consider When Updating Your Estate Plan
When a second marriage also includes children from previous marriages, things can get sticky.
You’ll want to consider:
- Do you or your spouse have children from a previous marriage or relationship?
- How do each of you wish to pass on assets to these children from previous relationships?
- What will happen if one spouse dies before the other? How will assets be divided between the surviving spouse and children from a previous relationship?
- Do you plan to have children together as a couple? If so, how will you structure inheritance to these children, as well as others from previous relationships?
Talking with a financial advisor will be important in setting up an estate plan that clearly addresses your unique situation.
Trusts
Trusts can be a good tool for estate planning during a second marriage. For example, let’s say you want your surviving spouse to be able to make use of your property after your death, but then, upon the death of your spouse, you’d like that property to pass down to your children from your previous marriage.
A QTIP (“qualified terminable interest property”) trust allows you to do just that. You can name your surviving spouse as a life beneficiary of the property within the trust, with your children named as final beneficiaries. That way, your spouse can make use of the property during their lifetime (with the property remaining under the ownership of the trust), while final ownership of the property passes on to your children after your spouse’s death.
Joint Property vs. Individual Property
As you enter your second marriage, you’ll want to consider which assets you’d like to keep separate from any joint property that the two of you will own.
Designated Beneficiaries on Existing Accounts
Review and update designated beneficiaries to make sure your current spouse, children from previous marriages, or others are included as beneficiaries according to your wishes.
Accounts to review include:
- IRA, 401(k), 403(b) or other retirement accounts
- Annuities and Pensions
- Brokerage accounts and other investment accounts
- Bank accounts and Certificates of Deposit
- Insurance policies like life insurance, disability insurance and long-term care policies
Regardless of whether or not you’re entering a second marriage, you should review designated beneficiaries on a periodic basis.
Powers of Attorney
Reassess and update powers of attorney (and durable powers of attorney — yes, they are different) for financial and healthcare decisions. These documents grant someone the authority to make decisions on your behalf if you become incapacitated.
Tax Implications
As you remarry, your joint estate could expand in size. This could potentially make your estate subject to estate taxes, depending on how you plan to pass it on to future generations. Work with a financial advisor to structure your estate in a way that maximizes tax savings.
Consider Prenuptial or Postnuptial Agreements
With a second marriage, you may want to consider a prenuptial or postnuptial agreement outlining how assets, debts, and inheritance will be handled in case of divorce.
Life Insurance
Review your life insurance policy to make sure it reflects your intentions for how benefits should be distributed between your new spouse and children from previous marriages. In some cases, you might want to consider additional life insurance coverage to provide for the financial security of your children alongside your new spouse.
Communicating Your Wishes with Family Members
In blended families, there can sometimes be tension around estate planning decisions. Including all family members in the discussion can help prevent potential conflicts down the line.
Have honest discussions with your new spouse, as well as children or other family members, about financial plans. Opening the door to communication can help avoid misunderstandings around your wishes regarding inheritance, asset distribution, and other financial matters.
Plan your estate with a Landmark Financial advisor
A Landmark Financial advisor can help you assess the impact of your second marriage on your overall financial situation, including how to update your estate plan according to both your wishes. Get in touch with us here.
This material was created by Starling Digital for use by Landmark Financial, LLC and does not represent the views and opinions of Avantax Wealth Management or its subsidiaries.