Second marriages are often the source of many different estate planning issues. Let’s assume that Mr. Smith marries Ms. Jones. Mr. Smith has three children from a first marriage. Ms. Jones also has three children. Both of them would like to take care of the survivor in the event of their respective deaths, but after the surviving spouse dies, each wants to ensure that “their money” passes to their children. At this point, Mr. Smith and Ms. Jones have been married for fifteen years.
One way to lessen any estate planning issues in a second marriage is to have a pre-nuptial agreement. Before they married, Mr. Smith and Ms. Jones would have laid out their rights to each other’s property in a contractual agreement, a prenuptial agreement. In this way, Mr. Smith would know what his rights are to Ms. Jones’s property in the event of her death, and Ms. Jones would know what her rights were to Mr. Smith’s property in the event of his death.
Mr. Smith and Ms. Jones would also keep their property titled separately from one another. They could have joint accounts, but the majority of their money would be in individual names, with Mr. Smith’s accounts titled in his name and Ms. Jones’s accounts titled in her name.
Such an arrangement is a very clean way to hold assets and to arrange one’s affairs in a second marriage situation. Unfortunately, it’s something that most people do not do or something that people slowly back away from as their marriage ages. People who have been married for fifteen years or more, for instance, aren’t going to maintain separate accounts. Eventually, they are going to combine their accounts into joint accounts.
Now, if Mr. Smith dies and he wants his money to benefits Ms. Jones for the remainder of her life, there are different ways he can do that. Mr. and Mrs. Smith could just have mutual Wills through which they leave their estates to one another then to their six children equally. Essentially, these Wills would be standard Wills that a married couple in a first marriage would have.
The problem with this is, when Mr. Smith dies and leaves his entire estate to Ms. Jones, Ms. Jones could change her Will after Mr. Smith died to leave everything (including the assets that used to be Mr. Smith’s money) to her children only, disinheriting Mr. Smith’s children. After he dies and leaves his estate to Ms. Jones, the assets are all Ms. Jones’s property and she is free to do with that property what she wishes, including leaving none of it to Mr. Smith’s children.
Mr. Smith and Ms. Jones could also enter a contract not to change their Wills. Essentially, Mr. Smith and Ms. Jones would be saying “after you die, I won’t change my Will, so all six children will inherit under my Will.” Such an agreement is legally binding, and the laws governing Wills do permit this type of agreement.
The problem with this is, nothing prevents Ms. Jones from giving away the money during her life. In other words, Mr. Smith dies and leave his money to Ms. Jones. Mr. Smith and Ms. Jones entered a contract not to change their Wills. Ms. Jones could gift her assets to her children before she dies and give her estate to her children. When she dies, her Will wouldn’t matter because she wouldn’t own the assets at her death.
The other solution is for Mr. Smith and Ms. Jones to maintain their assets in separate accounts and to establish trusts in their Wills for the other’s benefit. When Mr. Smith dies, his money would pass into a trust, created in his Will, for Ms. Jones’s benefit. Ms. Jones might even be the trustee of the trust for her benefit.
For the remainder of her life, Ms. Jones would benefit from the money that Mr. Smith left to her, but when she dies, Mr. Smith’s money would pass to his children, not Ms. Jones. The opposite is true for Ms. Jones’s money if she were to die first.
No solution is perfect and no solution is easy. All of the solutions require some level of cooperation and understanding. Over time, conflicts between family members can cause problems to arise with any of these solutions.