A few weeks ago, we discussed conversations you should have with your spouse when you ‘marry again‘, particularly after age fifty. It included discussions about who should pay what expenses and particularly decisions about who would provide and pay for long-term care. In addition to these conversations, here is a checklist for couples entering into a second marriage:
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Make a will.
Second marriages often include children from the first marriage. According to the latest Gallup poll, less than 50% of adult Americans have a will. Should you remarry and die without a will, what happens to your assets? State law governs who inherits your assets should you die without a will (called Intestate). In Alabama, potentially one-half of your assets would go to your new spouse. Often, people prefer 100% to go to their children. Solution: Drawing a valid Last Will and Testament can solve this problem. If you already have a will, review it to ensure it still reflects your wishes.
Consider a prenup (or postnup).
If you have significant assets, you should consider having both parties sign a prenuptial agreement that spells out who will receive what in the event of divorce or death. Many states, including Alabama, allow a surviving spouse to ‘elect against the will’ and potentially receive a significant share of the deceased spouse’s estate.
Title assets properly.
Instead of transferring by your will, certain assets can be transferred by joint titling. For example, if you have a bank or brokerage account in your name and die without a will, half of the value could go to your new spouse. Solution: you could re-title the account to add your child or children as joint owners so that it would transfer to them by title at your death. An alternative is a ‘Pay-on-Death‘ account which is similar to adding a beneficiary(s).
Update beneficiary designations.
Some assets will transfer according to the beneficiary designation. Examples include retirement plans and life insurance or annuities. A second marriage means either a divorce or the death of a spouse, which can be a tricky area. For example, you have a life insurance policy (or IRA) that lists your deceased spouse as your beneficiary. You later remarry but die before changing the beneficiary to your new spouse. Consequently, this situation would have the effect of naming your estate as the beneficiary and potentially result in half of the asset going to your new spouse.
Another example, arguably more detrimental than the first, is your life insurance (or IRA) beneficiary is your now ex-spouse. Again, you remarry but die before changing the beneficiary to your children or current spouse. The result is that all assets would transfer to your ex-spouse. Solution: Review all beneficiary designations to be certain they reflect your wishes.
You would be well advised to seek the counsel of an attorney experienced in these matters and consult with your financial planner to make sure all beneficiaries are updated, and your assets are in order.
Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including 50 Rules of Success; J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch Group. Consult your financial advisor before acting on comments in this article.
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