Remarriages are on the rise. Four of every 10 marriages are now remarriages, and half of previously married seniors have remarried again, according to a Pew Research Center study.
Let’s say partners each have children from a first marriage, and they are getting married. What issues do they need to think about? In addition to all of the family dynamics, there are many economic and personal issues they need to consider, such as:
• Income taxes
• Prenuptial agreements
• Pension, 401k and Social Security benefits
• Cost-sharing
• Estate planning documents
DOUBLE-CHECK DOCUMENTS
Consider the following real-life example. A couple remarried in their 50s. They each had children from a first marriage. The husband died 20 years later. He wanted to provide for his second wife. His will stated all of his assets went to his wife, with the understanding that on his wife’s death those assets would go back to his children.
However, what actually happened is when the husband died, the surviving wife — who lived a long time after that — simply combined their assets. On her death, the money went to her children. The husband’s children got nothing. They did not believe their father meant to do that with his assets. He didn’t, but he didn’t plan properly.
So, what should he have done? He should have set up what is commonly called a marital trust. The trust would have held the assets for his second wife when he died, but upon the wife’s passing the assets would go to his children. The trust document prohibits the widow from transferring the assets to her children.
LIFE CHANGES REQUIRE UPDATES
As for other important documents, everyone should have a durable financial power of attorney, durable health care power of attorney and a living will declaration. When you divorce or get married, update documents to reflect your new situation.
With regard to the durable financial power of attorney, consider whether you want your new spouse to have the authority to deal with your financial affairs or if you plan to keep your finances separate. A prenuptial agreement may dictate how that is handled.
With regard to the durable health care power of attorney and living will declaration, consider whether you want your children to make medical decisions for you. This might include end-of-life choices.
Estate planning documents don’t necessarily control the designation of beneficiary for retirement plans, annuities or life insurance policies. If you fail to change the beneficiary, your assets might not go to the intended recipients. You don’t want life insurance proceeds inadvertently to go to your ex-spouse instead of your new spouse or your children. Check your documents on a regular basis.
There is no one-size-fits-all with regard to remarriages or estate planning documents. This article has only scratched the surface of topics to consider. Consult your attorney, accountant, tax planner, other professionals and, of course, your family.
