The Wiewel Law Firm

Considering Remarriage? Time for a Fresh Look at Your Estate Plan

What are the inheritance rights and what are the key issues?

All major life events should bring some careful consideration of your estate plan and a second marriage is no exception, especially with the possibility of a pre-nuptial agreement, according to nwi.com in “Estate Planning: Planning for second marriages.”

There’s a second opportunity to sign an agreement detailing inheritance rights after the wedding takes place, called a “post-nuptial agreement.” The problem is that once the wedding has occurred and you are both legally married, you might get stuck with some surprises and, well, you’re married. For most people, it’s better to set things out before the wedding, rather than after.

There also may have been dissolution decrees in one or both of the couple’s prior divorces that have requirements which must be satisfied. A spouse may be required to maintain life insurance with the ex-spouse as a beneficiary. This can have an impact on the couple’s estate plan. It is recommended that you have everything discussed up front in the pre-nup.

The rest of the steps are those that should be followed for any estate review.

Make sure that the last will and testament reflects your new spouse. If there are any mentions of the prior spouse, you probably want to remove them.

Verify how all of the assets are owned. Will they continue to be owned by just one spouse, or converted to jointly owned? Does your estate plan have a trust, and if so, are assets owned by the trust? Does there need to be a change made to your trustees?

Many people don’t remember how their bank accounts are titled. Fewer still can tell you who their beneficiaries are on their retirement accounts, life insurance policies and bank accounts. Remember: the beneficiary designations are going to determine who receives these assets, regardless of any language in your last will and testament. Once you die, there is no way to contest that distribution. Review your accounts and make sure that the beneficiaries are up to date.

Part of your pre-nup and estate plan review will be to discuss inheritance rights for any children in the blended family. Do you want to leave assets only for your children, or do you want to leave assets for all the children? It’s not an easy conversation to have, especially at the start of the blending process.

Remember also that blended family dynamics can change over the years. When you review your estate plan next—in three to four years—you’ll have the opportunity to make changes that hopefully will reflect deepening bonds between all of the family members.

An estate planning attorney can advise you on creating or reviewing an estate plan.

Reference: nwi.com (May 5, 2019) “Estate Planning: Planning for second marriages”

Beyond the Usual Prenuptial Agreement

Prenuptial agreements protect assets.  However, sometimes they are planned to prevent certain behaviors.

Prenuptial agreements are set up to equalize assets such as when one or both parties enter the marriage with children from a previous relationship. It is an agreement that is arranged so the couple come to terns with potential issues beforehand.

However, some people try to do more with prenuptial agreements, according to Market Watch in "Prenuptial agreements contain more bizarre 'lifestyle' clauses."

Prenuptial agreements are now being used to guard against undesired behavior by future spouses.

For example, some agreements now penalize a spouse for cursing, gaining too much weight or hanging out with friends too much.

The problem with these agreements, besides the obvious who would want to marry someone with those types of demands, is their enforceability.

Courts have a tendency to look at agreements as being serious, as well as being fair and beneficial to the parties involved.

Reference: Market Watch (Sep. 9, 2017) "Prenuptial agreements contain more bizarre 'lifestyle' clauses."

Details of the Duchess of Alba's Estate

One of the richest aristocrats in Europe passed away recently and details about her estate plan have been made public. She left her husband nothing.

Spain's Duchess of Alba was a notoriously flamboyant woman and one of the wealthiest women in Europe. A direct descendant of King James II of England, she played with the future Queen Elizabeth II as a child.

Surprise. In 2011, the Duchess married her third husband, a mere 24 years younger than she.

A final surprise. At her passing the Duchess disinherited her husband.

This complete story is told in the headline of a recent article in The Daily Mail: "Duchess of Alba, who died aged 88, leaves NOTHING to her 64-year-old toyboy while her six children get the 3 billion fortune - and a palace each."

Will this move stand up in court?

Normally in Spain, as in the United States, you cannot cut a spouse out of an estate. However, in this case, an agreement was made before the wedding that the Duchess' new spouse would not receive any portion of her estate.

This agreement was made to ensure that her children did not object to the marriage.

Similar prenuptial arrangements can often be made in the United States. As long as the agreements are fair and voluntary, courts will generally uphold them as valid. In the absence of such an agreement, a spouse is always entitled to a portion of the estate.

These agreements are often a good idea when both spouses are independently wealthy and at least one of them has children from a previous marriage.

If you have questions about whether a prenuptial agreement is right for you and your intended, then consult an experienced estate planning attorney for advice.

Reference: Daily Mail (November 20, 2014) "Duchess of Alba, who died aged 88, leaves NOTHING to her 64-year-old toyboy while her six children get the  3 billion fortune -  and a palace each"

Estate Planning 101

Although often neglected, drawing up an estate plan is as essential to your legacy’s future as drawing up a simple will. A trust, or estate, is not the same as a will - and both are strongly encouraged for financial legacy planning. Below is a basic guide for establishing your estate.

A recent NASDAQ.com article, titled "Estate Planning Guide 101: A Basic Guide To Establishing Your Estate," gives some basic estate planning instructions that can help get you started.

Outline Your Estate. It is important to outline your current net worth. Forbes describes this equation as:

Net Worth = Assets – Liabilities

 

The original article explains that assets include information detailed in bank statements, investment statements (such as from mutual fund accounts and retirement plans), trust assets and business interests. Also, include personal property and real estate. Liabilities include debts reflected on credit cards, mortgages, tax bills, student loan statements, business loans, and other indebtedness.  Once you account for your living expenses, you can then see what can be passed to your beneficiaries, and whether you should gift during your life.

Name Your Beneficiaries, Divide the Assets. Next you need to decide who will be the recipients of your estate. This can be very personal and needs to be handled with care, as it is this point in the planning process when you need to think about how much of your estate will go to family and how much will go to charity.

Name Your Trustee. Naming your trustee needs to be handled with the same amount of care that you used when divvying up your assets. Selecting the person to be in charge of your affairs is no small decision, the original article cautions. Naming your trustee takes a significant level of trust, responsibility, and foresight.

Hire a Lawyer. As you work through theprocess, engage a qualified estate planning attorney.  Do not leave planning your will or estate for later. Do It Now!  Take the time to speak to your estate planning attorney and map out the details of your legacy now.

Reference: NASDAQ.com (October 15, 2014) "Estate Planning Guide 101: A Basic Guide To Establishing Your Estate"

Step by Step Estate Planning with a Prenup

The man had inherited his father's business when he was in his 30s and spent the next few years growing it into a $6 million company. When he later got engaged, he was concerned about keeping this increasingly valuable asset in the event of a divorce. So before tying the knot, the man asked his fiancée to sign a prenuptial agreement that kept all of his pre-existing assets--including his business and the related real estate--entirely separate from his wife. But now the man was in his 40s with two children, including one from his wife's previous marriage, so he had a more pressing concern: Providing for his family in the event of his death. Because the business represented the vast majority of his wealth, the prenup severely limited the assets that his wife would automatically receive upon his death.

The Wall Street Journal article "Creating an Estate Plan Around a Prenup" chronicles how an estate planning attorney worked with a client to ensure the needs of the client were addressed. After thoroughly understanding the estate planning goals of the client, the attorney created a plan that provided for the client’s family after he passed away. This plan preserved the terms of the prenuptial agreement that kept his wife from taking his assets and business in a divorce. The adviser suggested using family limited partnerships. This type of entity gave the client a way to provide for his wife with income from the business—without giving her control of the enterprise.

Under the family limited partnership structure, the client had 99% limited partner ownership in the two companies. When he died, his will would set out some of the limited partner interest to his wife. These shares would be given to a testamentary trust with the wife as trustee and beneficiary. As a result, the wife would receive income from the business through the trust; however, she would not get a controlling stake in the company.

The estate planning attorney created the partnerships and transferred ownership of the business assets into them. The WSJ reported that the client and his wife have been very happy with the results for more than 15 years now, with both a strong business and marriage.

Reference: Wall Street Journal (July 11, 2014) "Creating an Estate Plan Around a Prenup"

Is A Prenup Right For You?

Prenups are designed to protect assets brought into the marriage, and if you don't have any yet, don't feel as if you're doing something wrong by not asking your partner for a prenup.

Prenuptial agreements – prenups – are a study in contrasts. On the one hand, you are pledging to love and care for your future spouse for life, for better or for worse, while on the other hand you are jotting out a kind of contingency plan. Face it: a prenup is not a romance enhancer.

Still, especially with blending families, a prenup can be a prudent tool to maintain peace and domestic tranquility between the respective sides of the to-be-formed family. Love may be blind, but it is best to enter the marriage with both eyes open. Not surprisingly, the use of prenups is on the rise.

For an interesting perspective on the prenup, consider a recently published article from Reuters called “Three things to consider before you ask for a pre-nup.” What exactly should you consider?

Well for starters, every prenup represents the coming together of two very different and complex financial lives, two lives of separate assets and separate liabilities. Things can get complicated quickly. A prenup, however, offers both a way of seeing difficulties and of resolving them far in advance.

Another interesting take-away from the article is that future inheritances ought to be addressed in the prenup, not just your current income and assets. How and when an inheritance may be received can be extremely important, especially when the inheritance may include important family assets, even ownership in a family business. Consequently, those planning for such “family assets” in their estates today already may be asking of their children to include these assets in the prenuptial agreement negotiations simply to protect the family.

There is much to consider when it comes to planning a prenup, in addition to a wedding itself. If you are needing a little more encouragement, then a Forbes article titled “Why I Decided To Get A Prenup -- And So Should You” may help address some of your concerns.

Reference: Reuters (November 27, 2013) “Three things to consider before you ask for a pre-nup”