Second marriages can lead to estate planning challenges

May 03, 2013 (Press-News.org) Second marriages can lead to estate planning challenges

Article provided by Katherman, Heim & Perry
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Those who find love a second time around can face a unique set of challenges when designing an estate plan. These issues can be particularly difficult if children are present from the first marriage.

Some of these challenges include:
-Who receives assets, the second spouse or children from the first marriage?
-Who makes decisions if someone becomes incapacitated?
-Are there ways to equalize the distribution of assets between a new spouse and children from a prior marriage?

Couples often answer these questions by using a trust. At the death of first spouse, his or her assets would be placed within a trust. The surviving spouse would receive payments from this trust until his or her passing. At that time, the trust would often expire and the assets would be distributed amongst surviving children.

However, there are many other estate planning tools which can be used to help couples and their heirs solve problems like this.

Estate planning tools that can be used in second marriages

The first option is a prenuptial agreement. This legal document can identify and categorize the couple's property with specific instructions on how the property should be distributed in the event the marriage ends. The document can also be effective in case of death.

Although this agreement is valuable, it is also wise to include additional tools such as a will and trusts. A will is a legal document that outlines the distribution of property at one's death, while a trust involves a third party managing money or other assets for the benefit of others. There are many types of trusts available that can be used to benefit each individual estate.

It is also important to include documents outlining one's wishes in the event of incapacity. A second spouse and children from a previous marriage may disagree on measures that should be taken, such as whether to use a feeding tube or the extent of life sustaining measures that should be taken. Completing a living will and healthcare power of attorney can help reduce conflicts since these documents outline wishes regarding healthcare decisions.

In addition, some couples find it helpful to take out additional life insurance policies to help provide funds for children and a surviving spouse.

Determining what type of estate plan is best for each unique situation can be difficult. In addition, it is often wise to have preexisting estate plans reviewed regularly by an experienced estate planning attorney to make sure the plan still meets your needs and takes changing tax laws into account.