[Editor’s Note: Today’s guest post is from Mike Johnson, a legal writer working for Drizin Law, a Las Vegas company specializing in estate planning, probate, trusts, etc. It discusses some important information you need to know if you are divorced and considering remarrying. You probably should read it even if you aren’t considering remarrying. Or even if you are just considering divorce. Bottom line: Keep your estate plan up to date lest your ex gets everything! We have no financial relationship.]
Estate planning may not be the first thing on your mind if you are intending to remarry. However, making changes to your estate plan is more important than you may think, so you should not put it off.
Why Is an Up-to-Date Estate Plan So Important?
Making sure that you have an up-to-date estate plan in place is one of the most important things you can do in life. The plan covers important considerations that ensure your wishes are carried out upon your death. The future is never certain.
Remarrying brings big changes to your life that may necessitate making big changes to the estate plan you have in place. For instance, your beneficiaries may change or you may want to update your financial arrangements. You and your future spouse may already have wills and a prenuptial agreement in place, but prenuptial agreements can have clauses written into them that dictate that their agreement takes precedence over any elective share of property left in a will. In this case, a prenuptial agreement can “trump” any other legal documents. Things can get even more complex if you have significant assets and/or children from a previous marriage. An estate planning attorney can help you with the necessary changes and answer relevant queries. However, as a starting point, let’s examine some of the main factors you need to consider before remarriage.
#1 Updating Your Will
If you have a will, you need to make sure that it reflects your current situation. When you change a will, make sure that you are thorough in including all of your wishes. This should cover everything from who gets any assets you own to who should look after your dog. Take time to ensure that your will clearly states your wishes for assigning ownership of these belongings/assets. Are their children involved in the remarriage? Do you wish your children from a previous marriage to receive more of an inheritance than your new spouse’s children? Do you want the inheritance split equally between all children? How do you want to pass down personal possessions, even those that have little monetary value? Will you make use of accounts such as IRAs for investments due to the tax benefits when they are passed down to your beneficiaries?
Again, take the time to ask the hard questions. A well-designed will and estate plan can ensure your assets pass to your desired beneficiary and legally help your family keep more of what you have earned in life.
#2 Consider a Trust to Protect Assets for Minor Children
The most common reason people set up a trust is to minimize future attorney fees and court costs by avoiding probate. For a divorced parent, another reason is to protect assets that you intend to leave to your children from an ex-spouse after your death. If you simply leave these assets to your children in the form of a will, and they are minors when you die, your ex-spouse will take control of the assets. If you do not want this to happen, setting up a trust is a good idea. You get to decide who controls the trust and who manages the assets on behalf of your children until they reach adulthood.
There are a lot of different tax rules for beneficiaries of income from trusts. With the help of your estate planning lawyer, it is possible to set up a trust that is free from double taxation allowing your children to keep more of their inheritance.
#3 Updating Your Beneficiaries
The beneficiaries that you have listed to receive certain assets, such as the proceeds of insurance policies and retirement funds, may no longer affect your current desires. For this reason, it’s important that you have the right beneficiaries in place.
Federal law states that your current spouse at the time of death will automatically be the beneficiary of a 401(k). This can be altered, with the understanding of your partner. If you want the beneficiary of your 401(k) to be your children, your spouse must sign a waiver stating they understand they will not inherit the money, and agree to the change in beneficiary.
Some accounts, such as Roth IRAs, have more than just tax benefits. You can name the beneficiaries at the time of opening the account and change the beneficiary designation at any point while the account is active. This means that you do not have to default to your spouse receiving the money.
#4 Review How Your Property Is Titled
Title shows who owns an asset and is a vital aspect of any estate plan. Many complications can ensue when divorcees still maintain joint ownership of an asset. Upon your death, ownership of the jointly held asset — primary residence, vacation home, car, boat, ATV, etc. would go to the surviving person named on the title or at least be subject to a claim of 50% of the value.
You can see how important it is to negotiate and come to an agreement on ownership of all property with your ex-spouse before your death. Check titles meticulously to make sure that the right people get to benefit from your assets when you die.
#5 Update Your Power of Attorney (or Get One in Place)
No one ever wants to think about a time when they are not able to make decisions for themselves and their family. Most people simply think of drawing up a will and neglect to consider what would happen if they ever got injured or became sick. You need to make sure that if either of these things ever happens to you, you have someone who you trust making decisions on your behalf. For this reason, if you are getting remarried, you need to consider a durable power of attorney, health care decisions, and financial wellness in your estate plan.
Incredibly, only around 18% of people over the age of 55, in the US, have a will, a health care directive, and durable power of attorney all in place. These parts of an estate plan are equally important.
Considerations for the Widow or Widower Remarrying
In the tragic event of losing a partner, most of the considerations above still apply to your situation. Think about the following scenario: following a partner’s death, a widow inherits everything from their husband. When they remarry, these assets become the joint property of their new partner. If the widow then passes away, assets might go to their new partner, and any children from the first marriage are left by the wayside. Careful estate planning can ensure this doesn’t happen. Make sure to update your will, beneficiary designations, titles to property, and power of attorney to reflect your desires.
If you are making plans to remarry, you probably have a lot to think about. You may be spending time deciding where to get married or where you and your spouse are going to live as a couple. No matter how many other things you have to consider, it’s vital that you revisit your estate plan. If you do not spend time on this aspect of the new chapter in your life, you may find that your ex-spouse gets access to some of your finances and possessions if you die.
Updating your estate plan when you remarry is not something that you should delay. You need to make sure that your wishes are reflected and that your future spouse, and any children that you have, are protected.
Did you revise your Estate Plan before remarrying? What advice do you have for those in this situation? Comment below!
Need to revise your estate plan? Our WCI Recommended Estate Planning Attorneys can help. They offer good advice at a fair price.
The post Getting Remarried? Revise Your Estate Plan appeared first on The White Coat Investor – Investing & Personal Finance for Doctors.