It’s not news that American families don’t look like they did on 1950’s sitcoms: a mother and father who married for life and raised their two and a half biological children to adulthood. With our divorce rate at 50%, remarriage by half of those, and a growing number of same-sex parents, the “typical” family includes a mix of biological children of both spouses.
This new “typical” family creates challenges when it comes to estate planning. Not only does it involve delicate issues as to who gets whose assets and how much, but it can also entail unwinding prior estate entanglements. Here’s a checklist of steps you should take:
• Create a new financial plan. Estate plans are only as good as the financial plan they’re based upon. A financial plan establishes your goals for all members of your immediate family. It also requires you to take full inventory of all your assets — what kind they are, their current value, and in whose name they’re held. You also need to create a “plan within a plan” that takes into account assets held by or for the benefit of all your children from all your marriages.
• Confirm prior beneficiary decisions. Review what your obligations and wishes are to support your ex-spouse and any of his/her children or any of yours who you still want to remain as beneficiaries of your estate.
• Update your current beneficiaries. If you participate in a company retirement plan, own an IRA or annuity, or are covered by a life insurance policy, you need to add as beneficiaries any recent additions to your family. You also need to subtract any who no longer apply, like your ex-spouse. If your ex-spouse remains the owner of an insurance policy, be sure that it was stipulated that way in your divorce decree (if not, fix it).
• Close or re-title any preexisting joint accounts. Be sure that any bank, brokerage, or mutual fund accounts you held jointly with your ex-spouse are appropriately retitled.
• Decide who will get what from whom. Do you and your current spouse agree to provide joint assets to either set of children from a prior marriage? Neither of you may want to pass on significant amounts of your own assets to the other’s children, especially if they’re independent, mature adults. It’s essential that both you and your new spouse are fully comfortable with your joint decisions.
Create a new will and trusts. These are your most important estate documents; and once you’ve remarried, you need to revisit them. A new will is essential, as is the replacement or recreation of trusts. You’re stuck with any irrevocable trusts you established that named your prior spouses and your children from that marriage. But if you’ve created any revocable trusts to provide for your ex-spouse and children from another marriage, now may be the time to undo them and replace them with trusts for your new family. For people in their second (or later) marriage, there can be advantages to creating a qualified terminal interest property trust. Called a “QTIP” trust, it was specifically designed for couples in their second or later marriages. It enables you to designate assets your current spouse can tap into for income while he/she is alive; but avoid passing on to his/her children by a previous marriage after he/she dies.
Reesa Manning is Vice President and Senior Financial Advisor at Integrated Wealth Management, specializing in retirement and income planning. For more information, call Reesa at (760)834-7200, or [email protected].
The above is being provided for informational purposes only and should not be considered investment advice. The information is as of the date of this release, subject to change without notice and no reliance should be placed on such information when making any investment decisions.
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