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Estate planning for couples in second marriages when each spouse has children from a prior marriage requires a few extra steps.
When each spouse dies, they may want his or her children to receive an immediate inheritance with the rest going to the surviving spouse.
Nj.com’s recent article, “Second marriage? How to make sure your children get an inheritance,” explains that spouses can leave their assets to anyone they want. They can even leave out their spouse from an inheritance.
In New Jersey, for example, the surviving spouse can choose to receive a third of the estate by filing a complaint in the Superior Court within six months of the appointment of a personal representative of the deceased spouse’s estate. This is known in the Garden State as an elective share.
Another strategy is a QTIP or “Qualified Terminable Interest Property.” This is a type of trust designed to preserve the marital deduction for estates that may be subject to estate tax. The federal estate tax exemption is $11.2 million per person in 2018. In addition to federal estate tax laws subject to change down the road, some states also have their own state estate tax.
People in second marriages very frequently want to provide for their spouses when they die. However, they also want to be certain that their own children are able to inherit the remaining assets after the death of the second spouse. This can be done by creating a marital trust for the benefit of the surviving spouse with the remaining assets in the trust going to their children after the second spouse dies. A QTIP may not accomplish the objective of an immediate inheritance for children. An experienced estate planning attorney can review specific situations and determine if a QTIP or other trust would be favorable for a client.
Another option to discuss with an attorney is a postnuptial agreement, where the surviving spouse waives his rights to an elective share or executes wills or trusts that designate assets to children at their death. An attorney can also craft their estate planning documents, so an amount equal to one-third of the augmented estate will go outright to the surviving spouse and have the balance distributed to the children. Finally, spouses may choose to designate their children as beneficiaries on IRAs and insurance policies, instead of the surviving spouse.
There are more than a few ways to make estate planning work in an equitable fashion for everyone in the family. An experienced estate planning attorney who works with second and subsequent marriages will be able to help you create the plan that will work best for your unique situation.
Reference: nj.com (October 10, 2018) “Second marriage? How to make sure your children get an inheritance”