In the United States, the divorce rate for first marriages hovers around 50 percent and increases for second and subsequent marriages. Approximately half of the people who go through a divorce in the first marriage go on to become part of a blended family at some point. Anyone who is part of a blended family knows that integrating two families into one comes with its own set of challenges. All too often, those challenges continue, or even worsen, after the death of one spouse. That possibility heightens the need for thorough and comprehensive estate planning if you are part of a blended family. You may find yourself wanting to provide for your current spouse in your estate plan; however, wanting to protect assets that are intended for your children from a previous marriage at the same time. A Fargo asset protection planning attorney at German Law Group explains how to protect assets intended for your children when you remarry.
How Remarriage Changes Your Estate Plan
Although estate planning is a highly individual process, many newly married couples choose to create reciprocal Wills if it is a first marriage for both spouses. Those Wills typically dictate that if one spouse dies, he/she leaves all assets to the surviving spouse with the understanding that those assets would then be passed down to the couples’ children upon death. If that describes the essence of your estate plan from your first marriage, you definitely need to make changes to that plan if you have since divorced and remarried. Understandably, you want to provide for your new spouse if something were to happen to you; however, you still want some of your estate assets to go to your children when you are gone.
Options for Protecting Assets
Now that you are remarried, the need to protect your new spouse may appear to conflict with your desire to preserve assets for your children from your previous marriage. One solution is to leave everything to your current spouse and count on him/her to leave those assets to your children upon death. That would require you to have complete faith that your spouse would follow your wishes instead of squandering, or otherwise depleting, the assets before the end of his/her life. The reality is that if you choose that option, after you are gone your spouse will have complete control over those assets with no legal constraints on their use. Ultimately, your children could wind up with nothing if your spouse intentionally, or unintentionally, fails to honor your wishes. You may feel as though you must choose between protecting your children’s inheritance and providing for your current spouse. Fortunately, there are estate planning tools and strategies that can help you do both.
One thing you can do before you even get remarried is to enter into a prenuptial agreement. Although prospective brides (and grooms) once tended to balk at the idea of signing a prenuptial agreement, it is now fairly common for both spouses to have reasons to want a prenuptial agreement in place. This is particularly true if the marriage is not the first marriage for the parties. A prenuptial agreement can set forth in legally actionable terms which assets are to be protected and passed on to your children after your death.
If your children are minors, creating a simple revocable living trust can help protect your children in the event of your incapacity. When you create the trust, you name a successor Trustee. This person will take over control of the trust assets if you ever become incapacitated. The trust terms can then be used to ensure that your children benefit from the trust during your incapacity.
Another very common tool for parents who want to preserve assets for children from a previous marriage while providing for a current spouse is a QTIP trust. A QTIP trust operates in basically the same way as any other trust. You will need to appoint a Trustee to oversee the administration of the trust and to manage the trust assets. Assets transferred into the QTIP trust are not actually gifted to your current spouse when you die. Instead, your spouse receives income from the trust assets but cannot withdraw the principal from the trust nor can he or she decide on the ultimate disposition of the trust assets. In the case of real property, your surviving spouse may also receive a “life estate” in the property, meaning that he or she may remain in the home until death, but will never own the property outright. When your surviving spouse dies all assets held in the trust are then transferred to the intended QTIP trust beneficiaries, typically your children from a previous marriage.
Contact a Fargo Asset Protection Planning Attorney
Please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding how to protect assets for your children when you remarry, contact an asset protection planning attorney at German Law Group by calling 701-738-0060 to schedule an appointment.