Brady Bunch Marriage? Estate Planning Basics for Blended Families and Second Marriages
By: Lauren C. Enea, Esq.
Second marriages may often feel like a fresh start, but when it comes to estate planning, balancing one’s duty of loyalty to one’s existing family and children and one’s desire to provide for a new spouse must be considered. With second marriages, the intended beneficiary of one’s assets may not be the surviving spouse, as each party may have adult children or other relatives they wish to also provide for. That being said, not providing for a surviving spouse at all, may not be ideal either. Some items to consider include the following:
- Dying Intestate and the Importance of a Last Will and Testament
In New York, if you die without a properly executed Last Will and Testament, you are said to have died “intestate.” What this means is that the distribution of your assets will be determined in accordance with New York Law. For example, if you are survived by a spouse and children, your spouse receives the first $50,000 plus one-half (1/2) of your estate with your children sharing the remaining one-half (1/2). As such, it is important that a Last Will and Testament be executed that properly reflects your wishes.
- Pre-Nuptial Agreements and the Right of Election
In New York, you cannot disinherit your spouse unless you have agreed to in a contractual agreement, such as a pre-nuptial agreement. Under the New York Estates, Powers and Trusts Law Section 5-1.1A, each spouse has a right of election to receive the larger of $50,000 or one-third (1/3) of the deceased spouse’s net estate, which is known as the “elective share.” As such, even if one’s Last Will and Testament does not provide for one’s spouse or provides for one’s spouse in a lesser amount than the elective share prescribes, the surviving spouse can still seek their elective share, unless they have waived said right in a pre-nuptial agreement. While not the most romantic gesture, the execution of a pre-nuptial agreement may be prudent before a second marriage.”
- Joint or Separate Property?
If you and your spouse own property “joint with rights of survivorship,” said assets pass automatically to your surviving spouse. In my experience, individuals in a second marraige often keep the assets they brought to the marriage separate from their spouse (with their children and/or other family members as named beneficaries) and may open a new joint bank account with their spouse for the assets they would want to pass automatically to their surviving spouse.
- Life Estates and Lifetime Rights to a Surviving Spouse
Another common gesture in estate planning for second marriages is to allow the surviving spouse, who does not own the primary residence of the couple, to remain in the home after their spouse has passed away. This can create complexities. For example, if the remainder beneficiaries of the property are the children, they may be concerned as to the ability of the surviving spouse to maintain the home and pay for its expenses. Additionally, if the spouse has to go to a nursing home or assisted living facility before their passing, does the spouse’s life estate in the property terminate, thus, allowing the children to sell the property? These are questions that need to be considered. An option may be to leave the primary residence outright to the spouse in lieu of his or her receipt of other assets, or to allow the surviving spouse to remain in the home for a period of time, such as two years, in order to allow him or her to arrange for alternative housing.
- Marital Trusts
When the first spouse passes away, a trust can be established for the surviving spouse’s benefit. These trusts can be created within one’s Last Will and Testament (a testamentary trust) or through probate avoidance tools, such as Revocable Trusts. Additionally, the trustees of the trust for the surviving spouse can be the children, friends or relatives of the creator of the Trust, which may avoid concerns of the funds being depleted during the surviving spouse’s life imprudently, leaving little for surviving children. Alternatively, the Trust can provide that the spouse receives the income of the trust for their life. Once the surviving spouse passes away, the remaining funds can then be distributed to the creator’s children.
- Life Insurance
The use of a Life Insurance Policy is another viable option for providing for one’s second spouse. The insurance can be owned by an Irrevocable Trust, in order to remove the value of the death benefit and cash value (if any) from one’s taxable estate upon death, and it can also provide that the income and/or principal can be used for the support of the surviving spouse. One’s age, health and insurability will be a factor in obtaining the insurance.
Each family’s situation is different and this list of considerations is not exhaustive and only exemplary of one’s options. If you are considering a second marriage or already married, it is important to speak with an estate planning attorney who has worked with clients who have had multiple marriages to discuss structuring an estate plan that fits your needs.
Lauren C. Enea, Esq. is an Associate at Enea, Scanlan & Sirignano, LLP. She concentrates her practice on Wills, Trusts and Estates, Medicaid Planning, Special Needs Planning and Probate/Estate Administration. She believes that it is never too early or too late to start planning for your future and she enjoys working with individuals and families to ensure that their estate and long- term care plan best suits their needs. Ms. Enea is on the executive committee of the New York State Bar Association (NYSBA) Elder Law and Special Needs Section and is also the Co-Editor of the NYSBA Elder Law and Special Needs Section Journal. She is admitted to practice law in New York and Florida. She can be reached at (914) 948-1500.