Second marriages are an opportunity to start again. They’re also a perfect time to evaluate and address your assets and your future. Remarrying impacts not only your family structure but also your finances, goals, and responsibilities. Estate planning for second marriages is a critical part of protecting your future together and should be done with great care.
Why Is Estate Planning for Second Marriages Important?
There’s no doubt that second marriages change families. For some, the family dynamic looks different if children are brought into the picture. Those who remarry later in life may have amassed more wealth or debt than younger newlyweds, and they will need to consider how to manage their new financial situation. Failing to plan your estate properly can result in unwanted consequences for your new family. Without legally enforceable estate planning documents, default state laws kick in and determine what happens to your assets.
Intestate Succession Law
If you die without a will, all assets in your name must go through the probate process. Those assets are distributed according to your state’s intestate succession laws. Essentially, under these default rules, certain family members inherit your assets based on their relationship to you. For example, under Tennessee’s intestate succession laws, spouses inherit first, followed in order by children, parents, siblings, and so on until there are no assets left to distribute. If your new spouse has children from a prior relationship, those children (i.e., your
stepchildren) will not inherit anything under the law unless you legally adopt them. This is just one example of why estate planning is so important.
There are certain legal protections for spouses that entitle them to a portion of their spouse’s estate. This is known as the elective share, and it essentially prohibits you from disinheriting your spouse. It’s also a safety net in case you don’t create a will or fail to update the one you have.
Under Tennessee’s elective share law, the surviving spouse can elect to take a portion of the decedent spouse’s assets rather than what was left (if anything) under the will. The surviving spouse’s share is based on the length of the marriage. For example, if the marriage was less than three years, the elective share amount is 10% of the net estate. If the marriage was nine years or more, the elective share amount increases to 40% of the net estate.
You can avoid the elective share through a prenuptial or postnuptial agreement, where both spouses waive their right to the elective share.
Estate Planning Options for Second Marriages
There are several estate planning tools available that can effectively protect and provide for your family. Although all estate plans are different, here are some documents that couples in second marriages typically use.
Last Will and Testament
A last will and testament (or will) is the document you use to dispose of your assets after death. With a will, you can appoint an estate executor to handle your affairs, and you can appoint a guardian for any minor or disabled children. Even if you don’t have children or substantial assets, you can consider designating the next home for any sentimental belongings or heirlooms that you want to give to others.
An effective estate planning strategy is the use of trusts. They come in different forms and can serve a variety of purposes. Trusts are also helpful in avoiding or deferring taxes. A trust is a separate, legal entity that owns the property and is managed by someone (the trustee) for the benefit of another person (the beneficiary). Rather than leave money or property to a spouse under a will, some couples choose to fund a trust with assets and allow the beneficiary spouse to get the trust income and principal. There are many ways to structure a trust so that it serves the needs of your spouse and children. Keep in mind that trusts are complex instruments, so it’s best to work with an experienced estate plan lawyer.
A prenuptial agreement (or prenup) is a powerful tool for those remarrying. It’s a written contract between spouses that spells out how to handle financial matters in the event of divorce or death. Although they carry a certain stigma, prenups are an effective way to ensure financial security for your new spouse and children. They protect both spouses.
As mentioned above, you and your spouse can use a prenup to waive your right to the elective share. Without doing this, your spouse can get more than you left them in your will.
Contrary to popular belief, you don’t need substantial assets to benefit from a prenup. This document can protect your future earning potential. Prenups also help establish roles and set expectations in terms of managing finances as you enter into a new marriage.
Unlike a last will and testament, a living will is how you communicate your wishes regarding medical care. If you lose the ability to make decisions for yourself, a living will can provide instructions on things like life-sustaining treatments, pain management, and even funeral arrangements. Having this document in place keeps your family from the pain of having to guess what you would or would not have wanted.
Retirement Accounts and Life Insurance Policies
A useful and equitable way to provide for your family is through beneficiary designations. For example, you can name your children or new spouse as the beneficiary of a retirement account or life insurance policy. At your death, these assets automatically transfer to the named beneficiary without having to go through probate.
Let Our Firm Help Create Your Legacy
Estate planning for second marriages has its challenges and may bring up difficult conversations. At Batson Nolan PLC, we’re here to facilitate those honest talks and create a plan that carries out your wishes. We help families transfer their wealth seamlessly. Since 1860, we’ve been providing client-focused legal services to Tennessee and Kentucky families. To schedule a free consultation with an estate plan attorney at Batson Nolan PLC, call one of our offices or submit an online request. Let’s start planning your legacy today.