Estate Planning for Second Marriages

Second marriages can present unique challenges when it comes to estate planning, particularly if you or your new spouse have children from previous marriages. Let’s take a look at some of the factors, tools, and strategies to consider when planning for a second marriage.

Prenuptial Agreements

You’ve been married before, so you’re a little bit older and a whole lot wiser the second (or third) time around. However, this doesn’t mean you should throw caution to the wind. While it is hardly the most romantic aspect of planning a life together, many couples should at least discuss a prenuptial agreement. This is especially true if any of the following scenarios apply:

• One of you is giving up a lucrative career to get married
• You or your future spouse owns a business
• Either of you has significant assets and wants to keep them separate from marital assets
• One of you carries significant debt
• There are children from a previous marriage

If you think a prenuptial agreement makes sense in your situation, the next question is when the documents should be prepared. The sooner the better is a good rule of thumb. This will avoid the appearance of coercion, which can render some prenuptial agreements null and void. Your documents should be signed at least one month before the wedding, preferably before the invitations are sent out. In addition, you and your future spouse should each have an attorney involved in the design and review of the prenuptial agreement.

Review and Update Beneficiary Designations

Did you know that the people you have named as beneficiaries in various retirement and other accounts will generally inherit account assets even if other beneficiaries were named in your will? Consider the following situation. You got divorced, remarried, and changed your will to make your new wife your primary beneficiary.

However, if your ex-wife is still named as beneficiary in your retirement and investment accounts, she could inherit the funds, not your new wife.

Fortunately, it is relatively easy to make and update beneficiary designations. When you open a retirement account, such as an IRA, the provider generally offers a beneficiary designation form within the account itself. You can name your beneficiaries when you create the account and change your beneficiaries whenever you wish (with one possible exception). As for investment and bank accounts, making beneficiary designations will likely require you to request a transfer on death form. This, too, is easily accomplished.

The exception noted above refers to certain laws governing the passing of retirement accounts to spouses. Your spouse will typically inherit your 401(k), for example, unless he or she signs a consent form waiving his or her right to it. If your ultimate goal is to leave your 401(k) to your children, your spouse will have to agree to this in writing. Designating your children as beneficiaries of your 401(k) will generally not be enough.

Protecting Children from a Previous Marriage

If all of your estate's assets are left to your new spouse, your children from a previous marriage may not be provided for in the manner you would have wanted after you pass away. Your new spouse could, upon his or her death, leave all of the assets to his or her children from a previous marriage, thereby excluding your children. Conversely, if the majority of your estate is left to your children from an earlier marriage, there may not be enough assets remaining to provide for your new spouse or any children you have together. It can be a balancing act, one that requires proper planning to ensure your wishes, and those of your new spouse, are carried out. At the very least, each spouse should have a will. Without one, intestacy laws will likely result in assets being distributed in a manner neither of you would have wanted.

A trust, or combination of trusts, is generally a better approach than a will for second marriages and blended families. One such trust, which provides an excellent form of asset protection, is called a Qualified Terminable Interest Property Trust (QTIP). A QTIP Trust can generate income for the benefit of the surviving spouse during his or her lifetime. When the surviving spouse passes away, the QTIP's assets can be distributed between mutual and prior children according to the wishes of the previously deceased spouse. In addition, if the children are young, assets from the QTIP Trust can be held in another trust, under the control of an independent trustee. This approach can prevent estate assets from falling under an ex-spouse's control. It can also protect your children's inheritances from threats like creditors, lawsuits, and even your heirs' poor decisions if they are not yet ready to manage an inheritance on their own.

To learn more about planning for second marriages and blended families, contact us for a personal meeting to discuss your particular needs and goals.

Tips for a Successful Family Business Succession

Fewer than one-third of family businesses survive into the second generation, while only 13 percent make it to the third generation. Here are some tips to beat the odds and help your business live on for generations to come.

The sooner you start the planning process the better

The sooner you start planning for succession, the smoother the transition is likely to be. Beginning the process five years in advance is good and 10 years is even better. In fact, many experts recommend having a succession plan built into the original business plan.

Try to include family members in all discussions about succession

Creating your succession plan on your own and then simply announcing it to the rest of the family is a recipe for disaster. By discussing your thoughts with other members of the family, you'll get an idea of who wants to be part of future operations and who might be interested in pursuing other options.

Don't let your feelings or preconceived expectations cloud your judgment

Many business owners consider their first-born child to be the natural choice for successor. However, you have to ask yourself if this is honestly the wisest option. Maybe your oldest son or daughter isn't committed to the business. Maybe one of your other children is not only extremely interested in running the business but also has the right skill set. Or maybe none of your children possess the drive or the necessary skills, in which case it may be best to sell the business to existing employees or an outside party.

Similarly, you can't lose sight of what is best for the business itself. While giving everyone in the family an equal share of the business might seem like the simplest and fairest approach, it could lead to a host of problems down the road. It may actually be fairer, and smarter, to give the largest share of the business to your successor and find other ways to compensate family members who are not involved in running the business.

Train your successor well

No matter how extensively you plan, you can't expect your successor—or your business—to flourish without adequate training. You should involve your successor in decision-making and share your knowledge of what it takes to run the business effectively at least two years before stepping aside.

Things To Do Before You Start Traveling Again!

I don’t know about you, but I am so excited to travel again and go places. Now that we are able to come out of our homes and do the things we love to do and that we’ve been holding off doing, let’s make sure you can also have peace of mind knowing that you’ve got everything orderly in case something should unexpectedly happen.

1. The Legal Documents You Need If You Should Become Incapacitated: If you should ever become incapacitated, it is critical to have a Power of Attorney in place so that the person you want to take care of your financial matters can legally step into your shoes to handle something for you if you are unable to do so. It is also essential to have a Health Care Proxy in place so that the person you want to make medical decisions for you, if you can’t, is legally authorized to do so.
2. The Legal Documents You Need When You Have Young Children: At the very minimum, in addition to the above documents, if you have minor children, it is essential to get a Will in place and name a guardian who will care for your child if you can’t. We can help you through your decision-making process and help you get an appropriate Will done so that your children will be taken care of.
3. You’ve Got Legal Estate Planning Documents, But They Are Old: You may say, ‘well, I already have these legal documents.’ That’s great, but do they still make sense for you? Estate planning documents need to be updated over time. If your documents are over 5 years old, you should have them reviewed by us to make sure they still work for you and, if they don’t, get them updated.
4. Make Sure Those Who Will Be Taking Care of Things Are Informed: Do those people who will be helping you should something happen even know that they are named to help you? Do they know how to get access to your legal documents? What about your account information and passwords? Do you have them in a place that those who need to can find and access them? It’s very stressful for the people taking care of you to have to turn the house upside down looking for things in a crisis. Make a plan now so that you can help them later.

Now, go ahead and schedule that trip. However, also call us and get the above done now so that you can enjoy whatever you do and wherever you go.

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