Message from Maurice Offit – November 2014
Guaranteeing Your Family’s Inheritance After a Second Marriage
Sadly, one of every two marriages ends in divorce. But eighty percent of the people who get divorced, get married again; and most of them marry within four years after the date that they were divorced. It, therefore, doesn’t surprise me that I represent a number of clients who are interested in updating their estate planning documents after they remarry.
These clients, as you would expect, want to make sure that if they suddenly pass away, their new spouses are well provided for; but, at the same time, they want to guarantee that the children from their first marriage will receive a satisfactory inheritance. Read the article set forth below as it indicates the advice that I give to my clients who need guidance in dividing their estate between their new spouse and the children from their first marriage.
I never was a big Brady Bunch fan, but they’re the perfect family to picture for the purposes of this article. If you watched the Brady Bunch, you may recall that Mike and Carol Brady were previously married, before they married each other. Mike had three sons from his first marriage and Carol had three daughters.
Pretend for a minute that Mike calls me and indicates that he wants, in light of his marriage to Carol, to update his estate planning documents and provide for both Carol and his sons.
Here’s what I would advise Mike to do:
1. Suggestion No. 1 – Buy more life insurance. I haven’t met a client yet who looks forward to paying a premium to obtain additional life insurance. Yet, at the same, I know that it’s the best way for Mike to amply provide for both Carol and his sons as:
- A. Carol needs financial security if Mike predeceases her – she’ll want Mike to guarantee to her that she’ll be able to continue to live at the residence that Mike and Carol currently occupy; and she’ll need cash to pay her daily living expenses.
- B. But, at the same time, Mike needs to provide for his sons as he can’t assume that the assets that he bequeaths to Carol will pass at her subsequent death, to his sons. If Mike predeceases Carol, during the period of time between Mike’s death and Carol’s death, it’s more likely than not that Mike’s sons and Carol will drift apart from one another; and if this occurs, the assets that Mike bequeaths to Carol will, in all likelihood, pass at Carol’s death to her daughters, rather than Mike’s sons.
So, the easiest way to solve this dilemma is for Mike to purchase more insurance on his life. By doing so, Mike will have a larger estate. He won’t, therefore, have to decide if certain assets will be left to Carol, or to his sons. Rather, he’ll be able to bequeath his house and other assets to Carol and leave life insurance proceeds to his sons.
2. Suggestion No. 2 – Establish a trust for the benefit of the surviving spouse. Unfortunately, some of my clients are uninsurable and are unable to obtain additional life insurance coverage.
In situations like this, I suggest that they should provide in their Wills that (i) certain assets (i.e the house) will be left to their new spouse outright, and (ii) other assets will be left to the children from their first marriage; but, the majority of the assets will be left in a trust. If Mike was uninsurable, I would recommend that:
- A. Mike should bequeath the house to Carol.
- B. Mike should bequeath a certain amount of money to his sons.
- C. The remainder of Mike’s assets should be left to the trust that will be established in Mike’s new Will. The trust will provide that during Carol’s lifetime, Carol will be paid the investment income earned by the trust. In addition, Mike’s Will should indicate that the trustees, in their discretion, may distribute principal to Carol for her health, maintenance and support. But, at Carol’s death, the principal remaining in the trust will pass to Mike’s sons.
By proceeding in this manner, Mike will be able to assure Carol that she’ll be able to continue to reside at the family residence; and she’ll be able to receive sufficient funds from the trust to pay her daily expenses. At the same time, Mike can guarantee to his sons that at Carol’s death, the funds remaining in the trust will pass to them, rather than Carol’s daughters.
If you’ve remarried and have children from your first marriage, take a look at your Will confirm the amount of life insurance that you have in force. And if you’re troubled by the fact that there doesn’t seem to an equitable division of your estate between your new spouse and the children from your first marriage, feel free to give me a call.
ABOUT MAURICE OFFIT
firstname.lastname@example.org | 301.575.0308 Maurice Offit is an estate planning attorney, co-founder of Offit Kurman Attorneys at Law and a member of the firm’s Management Committee. Mr. Offit counsels a large number of clients who share an interest in minimizing estate taxes and asset protection from the claims of creditors.