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Estate Planning For Second Marriage

For Second Marriage In S.E. Michigan Only: Call 248-676-2233 to make an appointment with an attorney.

Many families today are two originally separate families blended together through a second marriage. These are not the traditional nuclear families of the 1950s. Due to many factors in society, one size does not fit all when it comes to estate planning. The wide varieties of family and financial situations require the use of sound decision making and drafting estate planning documents to implement will provisions.

What makes it more complicated is when one or both of the clients are in their second marriage. It has been stated in numerous publications that almost 50% of all marriages end in divorce. Death and divorce create huge numbers of persons eligible for remarriage. The husband or wife or both, may have children from a prior marriage. Each may have accumulated real and personal property and other assets that each may want to preserve for their children of the prior marriage.

There may also be a wide disparity in the wealth between the two spouses when they marry creating an inequality between the spouses. This can lead to the loss of important tax savings if the wealthier spouse refuses to fully fund the other spouse's maximum allowable tax exclusion amount.

Estate taxes present special concerns and careful consideration must be given to the manner in which the several sets of beneficiaries and the different type of assets will divide the tax burden. If the estate plan documents do not address this issue, one set of beneficiaries may take their inheritance free of estate taxes while the other set of beneficiaries (step-children) may see their inheritance greatly diminished or eliminated by estate taxes.

In most wills, there is often a clause that states the burden of paying the estate taxes will be on the "rest, residue and remainder" of the estate. It is a common method to defer estate taxes by planning the estate so taxes are paid when the surviving spouse dies. This preserves the bulk of the first to die estate for the surviving spouse. In this case, the beneficiaries taking the residue of the estate under the will of the second to die, can have their inheritance reduced by payment of the estate taxes. In a first marriage situation this may not matter, as the beneficiaries of the first spouse to die are also beneficiaries of the second spouse to die. However, in a second marriage situation, this may not be the case.

Example: A middle aged couple are in their second marriage each. Husband has two children and Wife has two children from a prior marriage. Husband may provide a generous bequest to his children at his death and the wife may have the same intention for her children with the residue of her estate when she dies. The problem arises when the husband dies first and the estate was planned so taxes are payable upon the wife's death. The husband's children may have received their full inheritance while the wife's children may receive little or nothing after the taxes are paid from their mother's residual estate that includes money that was deferred from the husband's estate when he died.

Search Your Second Marriage & EPIC Probate Questions Here

It is also important to note that when it comes to estate planning for a second marriage, there may be unresolved emotional issues from the previous relationship. The client's last contact with an attorney may have been his or her divorce attorney or the attorney for the former spouse and this experience may not have been very pleasant. This prior negative experience along with the failed first marriage can lead a spouse to take a defensive posture when it comes to estate planning in the second marriage. Sitting in a lawyer's office, discussing the division of assets and trying to make decisions regarding the children can cause bad memories from the divorce to resurface and impede the estate planning process. It is only natural to want to provide for biological children so both spouses must strive to keep an open mind when designing their estate plans.

Another issue that frequently arises is the remarriage of an older male to a younger female or vice versa. It is commonly perceived by adult children that a younger man or woman is after their parent's money. This distrust is magnified when the new spouse is about the same age as the adult children. The children from the prior marriage will not want to wait for the timely death of the new spouse from the second marriage before they inherit their parent's wealth and this can mean protracted legal battles over the estate.

One only need look to the media for examples such as Anna Nicole Smith and her wealthy and elderly husband J. Howard Marshal II. Mr. Marshall died after 13 months of marriage to Ms. Smith who was decades younger than him. The children of Mr. Marshall immediately started a legal fight to take their father's estate from Ms. Smith whom they viewed as a callous gold digger. This of course is an extreme example but it illustrates my point.

Dealing with support obligations to a former spouse and younger children present another bone of contention between spouses trying to plan their estates. It is important however, to ensure that the orders of the court as spelled out in a judgment of divorce are being complied with.

Antenuptial agreements (often referred to as prenuptial) are also being used with more frequency. These need to be reviewed by the estate-planning attorney to ensure they are currently effective. Many of these documents contain "sunset" provisions meaning they are no longer in force and effect after a specified number of years of marriage. The estate plan must contain the property distribution provisions that were agreed upon by the parties as reflected in a valid and currently enforceable antenuptial agreement.

See Prenuptial Agreements

If you are in a second marriage situation, it will be very helpful and beneficial for you to get with your spouse and begin discussing the inevitable. It will help you both greatly if you have discussed your concerns with each other before you meet with your estate-planning attorney.

Learn more at: Choices for a Surviving Spouse