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Estate Planning for a Second Marriage

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Second (or third or fourth) marriages often require careful balancing between the needs of the surviving spouse and the needs of the children from a previous marriage.

It takes a certain kind of courage to embark on second, third, or even fourth marriages, even when there are no children from prior marriages. Regardless of how many times you walk down the aisle, the recent article “Establishing assets, goals when planning for a second marriage” from the Times Herald-Record advises couples to take care of the business side of their lives before saying “I do” again.

Full disclosure of each other’s assets, overall estate planning goals, and plans for protecting assets from the cost of long-term care should happen before getting married. The discussion may not be easy, but it’s necessary: are the spouses leaving assets to each other or to children from a prior marriage? What if one spouse wants to leave a substantial portion of their wealth to a charitable organization?

The first step recommended with remarriage is a prenuptial agreement, or prenup, a contract that the couple signs before getting married to clarify what happens if they should divorce and what happens on death. The prenup typically lists all of each spouse’s assets and often a “Waiver of the Right of Election,” meaning they willingly give up any inheritance rights.

If the couple does not wish to have a prenup, they can use a Postnuptial Agreement (postnup). This document has the same intent and provisions as a prenup, but it is signed after they are legally wed. Over time, spouses may decide to leave assets to each other through trusts, owning assets together, or naming each other as beneficiaries on various assets, including life insurance or investment accounts.

Without a pre- or post-nuptial agreement, assets might go to the surviving spouse upon death of the first spouse, with little or possibly nothing going to the deceased spouse’s children.

The couple should also talk about long-term care costs, which can decimate a family’s finances. Plan A is to have long-term care insurance. If either of the spouses has not secured this insurance and cannot get a policy, an alternate is to have their estate planning attorney create a Medicaid Asset Protection Trust (MAPT). Once assets have been inside the trust for five years for nursing home costs and two-and-a-half years for home care paid by Medicaid, they are protected from long-term care costs.

When applying for Medicaid, the assets of both spouses are at risk, regardless of pre- or post-nuptial agreement documents.

Discuss the use of trusts with your estate planning attorney. A will conveys property, but assets must go through probate, which can be costly, time-consuming, and leave your assets open to court battles between heirs. Trusts avoid probate, maintain privacy, and deflect family squabbles.

Creating a trust and placing the joint home and assets, including cash and investments, inside the trust is a common estate planning strategy. When the first spouse dies, a co-trustee who serves with the surviving spouse can prevent the surviving spouse from changing the trust, and by doing so, can protect the children’s inheritance. Let’s say one of the couple suffers from dementia, remarries, or is influenced by others—a new will could leave the children of the deceased spouse with nothing.

Many things can  easily go wrong in second marriages. Prior planning with an experienced estate planning attorney can protect the couple and their children and provide peace of mind for all concerned.

Reference: Times Herald-Record (Sep. 21, 2020) “Establishing assets, goals when planning for a second marriage”