Getting Remarried? Avoid These Estate-Planning Mistakes

With a rise in “gray divorces,” it’s only natural that remarriage has become more prevalent among seniors. However, they also tend to be lax about updating their estate planning. 

 

It’s easy to have an estate plan fall out of date following a remarriage. The consequences for even unintentional missteps can be devastating, particularly for children from a first marriage or your new spouse. While both genders can be affected, statistically, women’s risk of being disinherited is greater than men’s. Here are some common pitfalls and how to avoid them.

 

Failure to protect your current spouse

It’s a good idea to design a custom plan to intentionally and seamlessly distribute assets to your children and new spouse. You might want to consider specifying that your spouse receives a life interest to remain in the marital home for the rest of their life following your death.

 

Failure to protect your children from a prior marriage

You might think to leave assets to your new spouse, with the understanding that they will provide for your children when you are gone. But this could leave your children at risk financially. 

 

One option might be to create a revocable trust that provides flexibility for your children and spouse’s financial needs.

 

Another strategy worth considering is establishing a separate marital trust to segregate your spouse’s funds instead of leaving a shared pool of assets to benefit your children and spouse. A separate marital trust allows you to allocate funds for your spouse’s benefit directly. With a marital trust, you can also stipulate that the remaining assets in the trust pass on to your children when your spouse dies.

If you have a taxable estate, make sure you optimize lifetime gifting strategies for your children to move assets outside of your taxable estate.

 

Failure to protect against depletion of assets

A person might decide to leave assets to their spouse in a marital trust, with the intention that the marital trust will pass to the decedent’s children after the second spouse’s death. But those assets could quickly be depleted if, say, the spouse suffers a debilitating medical crisis and enters long-term care.

 

To avoid the possibility that your children receive little or nothing, consider a life insurance policy instead of a marital trust to provide for your spouse at your death, leaving other assets to your children.

 

If you are worried that there won’t be enough left over for your children, a “second-to-die” life insurance policy will provide an additional inheritance upon your spouse’s death.

 

Failure to protect your estate from your first spouse

Even though a signed divorce decree might automatically disinherit your ex-spouse from your estate, you still need to switch the beneficiary designations on your retirement accounts and company life insurance plans. That way, your assets won’t inadvertently pass to your ex-spouse.

 

With a 401(k), a surviving spouse would typically be the automatic beneficiary. That is unless the spouse waives that right. But this is not the case for life insurance and individual retirement accounts, where the named beneficiary would generally receive the death benefit or asset upon death, depending on state law. Likewise, suppose you want your children to receive retirement or life insurance funds. In that case, you need to update beneficiary designations, as appropriate, keeping in mind the need for spousal consent on a 401(k).

 

It’s common for people to forget to update beneficiaries on retirement accounts or life insurance policies, wreaking havoc in divorce or remarriage. People must update these accounts and their estate plan to reflect any new circumstances, so their ex-spouse won’t have the ability to control their money or make health-related decisions on their behalf. By taking these steps, they will be free to live their life out peacefully, without worrying about what will happen to them and the ones they love when they’re gone.

STAY UP TO DATE

Subscribe to our newsletters

 
Subscribe to one or more of our newsletters, delivering meaningful insight on topics that matter to you and your family.

FURTHER READING

Latest Blog Posts

There are various ways to plan for the handling of your remains after death, as we discussed in Part I of “How to Handle Remains in Washington State.” What option you choose will likely turn on some combination of your…

Death is a part of life. Like taxes, there's no avoiding it. Also, like taxes, you may not like thinking or talking about the subject. However, if you think about death and how to handle your remains from a planning…

Every child deserves love, stability, and consistency. Is there a child in your life that you have considered adopting, perhaps because they are the child of your spouse or a child you are fostering? Perhaps there is an adult in…

The thought of losing your home or its contents in a disaster is a scary thought. Loss of life, destruction of irreplaceable items such as home movies, photos, and heirlooms make it unconscionable. But as we know in life, sometimes…

Spoiler alert: If you’re doing everything around the house (or at work) because you’re living (working) with a bunch of incompetent fools, or so they’ve led you to believe they are, you’re being manipulated. So pervasive is this phenomenon, there’s…

If you've created an estate plan, you've already spent a good deal of time thinking about what will happen to you if you become sick, incapacitated, or die, including where you will go (literally) when you die. After all, you don't want your…

If you're 18 or older and live in Washington State, you can legally change your name to anything you want as long as you're not doing so to commit fraud. For example, if your goal is to change your name to evade…

Your estate plan should ensure your special needs child experiences the best quality of life they can, that the assets upon which they will rely will last as long as possible during their lifetime, and that their eligibility for public services will be maximized. Learn more.

Popular culture is using the moniker "America's daughter" to describe Gabby Petito because she could've been any of our daughters. Learn how to talk to your daughter about the signs of domestic abuse.

When a couple decides to divorce, and one spouse is unable to support themselves, spousal support becomes a hot-button issue. Learn how to mitigate conflict and move forward.