What should a married couple in a second marriage consider when drafting their last wills and testaments? Oftentimes, each spouse in a second marriage has children from a first marriage. How does each spouse provide for the financial security of the surviving spouse while ensuring that a portion of the estate passes to his/her children when the surviving spouse dies?
For instance, assume that Mr. Smith married Ms. Jones. Mr. Smith has two children from a first marriage. Ms. Jones has three children from a first marriage. Mr. Smith and Ms. Jones have been married for ten years. Mr. Smith is aged 70; Ms. Jones is aged 68. Both are in reasonably good health. They jointly own their home. They also own jointly several bank accounts. Each also owns accounts in his or her individual name; in particular, each owns IRAs and 401(k)s in his or her own name. Ms. Jones has more individual assets in her name than Mr. Smith.
Mr. Smith and Ms. Jones tell the lawyer that they want a Will in case they die together in a common accident. They want to ensure that their children receive the proper amount of their respective estates.
This is a fairly typical set of facts that I see every week. Many couples come to me and tell me that they want a Will in the event they die together. I am uncertain from where this thought originates. I have had over 10,000 clients, and I have never had a married couple die in a common accident. I have never heard another estate/elder law attorney (and I know many) mention that they had a married couple die in a common accident. It does happen, but it is very rare. In the vast (vast) majority of cases, one spouse dies then the other spouse dies, often years later. There is “broken heart syndrome” in which one spouse dies soon after the first spouse, but even in those cases, the death of the second spouse is days, weeks, or months after the first spouse.
Mr. Smith has his own Will, and Ms. Jones has her own Will. While each spouse has their own Will, the Wills typically mirror each other. In other words, Mr. Smith’s Will says the same thing that Ms. Jones’s Will says.
Assume that Mr. Smith dies first. If Mr. Smith leaves his entire estate to Ms. Jones, Ms. Jones could change her Will after Mr. Smith dies. The assets that Mr. Smith left to Ms. Jones are now Ms. Jones’s assets, and she can do as she pleases with her assets. Ms. Jones might live another ten years after Mr. Smith’s death, so the assets that Mr. Smith left her have not been his assets for ten years by the time Ms. Jones dies.
Furthermore, some of the assets that Mr. Smith and Ms. Jones own are jointly owned—the house, for instance. Those assets will pass to the surviving spouse irrespective of what the deceased spouse indicates in his/her Will.
Can Mr. Smith ensure that “his” assets pass to his children after the death of Ms. Jones? The short answer is, maybe, but there is no easy solution. A solution is to have Mr. Smith and Ms. Jones draft trusts into each of their Wills. A trust in a Will is a testamentary trust. Mr. Smith and Ms. Jones then divide their assets as best they can so that some assets are solely in Mr. Smith’s name and some of the assets are solely in Ms. Jones’s name. The beneficiary designations on retirement accounts could be the testamentary trusts; Mr. Smith, for instance, would name the trust in his Will for Ms. Jones’s benefit as the beneficiary of his IRA.
The trust could say that the assets of the trust can be used for Ms. Jones’s benefit during her life, then the remaining assets pass to Mr. Smith’s children when Ms. Jones dies. While this solution sounds like something that will work, the devil is often in the details.
Who will be the trustee of the trust for Ms. Jones? Ms. Jones? One of Mr. Smith’s children? One of the children and Ms. Jones? What will the terms of the trust be? Should Ms. Jones have unfettered access to the assets of the trust? Limited access? The more liberal the terms of the trust, the more Ms. Jones could simply use Mr. Smith’s assets for her needs. The more restrictive the terms of the trust, the less Ms. Jones could use the assets for her needs. Either way, there could be conflict between Ms. Jones and Mr. Smith’s children after Mr. Smith’s death. There are also income tax and logistical issues involved with this plan.
The bottom line, unless a married couple trusts the surviving spouse “to do the right thing” and refrain from changing his/her Will after the death of the first spouse, there is no easy, practical solution to this issue.