Emotions can run high for any family during the estate planning process, leading to complications and delays. These problems are amplified when a couple is separated – either by divorce or death – and one or both spouses plan to remarry. In blended families, where there are children from the first marriages and children that may have resulted from subsequent marriages, they are often left with unbalanced inheritances and ex-husbands and wives may have disagreements about alimony payments, child support, or property ownership.
As Harry Burns advises in When Harry Met Sally, proper planning can save everyone involved “thousands of dollars in phone calls to the legal firm of That’s Mine, This is Yours.”
Estate plans for individuals who’ve been in prior marriages can be confusing, especially if they ended in a messy divorce. Spurned ex-spouses can make brash decisions or demands motivated more by fear and anger than reason. Children from both prior marriages and the new marriage can be entitled to drastically different inheritances, leaving some children with a huge inheritance virtually tax-free and others with an enormous estate tax debt and little else. Disparities in wealth between the spouses in the second marriage, also called fiscal inequalities, can create large emotional and financial difficulties. And large age differences between the two new spouses can destroy any hope for negotiation.
All that being said, how can those problems be avoided?
If the first marriage ends because of the death of a spouse, a Will, Living Trust can pass assets on to the deceased’s heirs, usually his or her surviving spouse and children. If the plan stipulates that all assets be left to the surviving spouse and he or she remarries, the children of the first marriage may be disinherited altogether. In some cases, if the surviving spouse who has control over the entire estate remarries, his or her new spouse may stand to inherit part of the deceased spouse’s estate. If that happens, the children of the second spouse could become de facto beneficiaries.
This situation can become even more problematic if the new, second spouse is close in age to the children of the first marriage. If the last biological parent of those children passes away, his or her new husband or wife may inherit the entire estate, forcing the remaining heirs to wait until the new spouse passes away to collect.
Of course, proper planning can avoid many of these unexpected and nonsensical results. For example, if Jack divorces Jane and marries Jill, his estate plan can specify that his assets be placed in a special trust for the benefit of Jill, his second spouse. This trust can provide for Jill’s living expenses, but not allow invasion of principal. After Jill’s passing, the remainder of the assets in that trust can go the Jack’s children from his prior marriage.
There are a myriad of planning strategies available to address thorny family issues. These complications are best addressed with the help of an estate planning attorney long before any of the original or new partners pass away. Everyone involved should establish a Will or Living Trust to clearly state what assets are to be inherited by whom. In some cases, where the partners in the first marriage were also business partners, a joint business succession plan should be put in place for a smoother transition. We assist individuals and businesses in Nassau County and throughout New York City and Long Island with complicated estate and tax planning matters on a regular basis. Contact us today for a complimentary consultation.