By Charles Sims Jr., Special to The New Tri-State Defender
Roughly four in 10 new marriages in
2013 included at least one partner who had
been married before, and altogether about
42 million Americans have been married
more than once.
A second marriage can create numerous
estate planning challenges, especially when
you wish to provide for both your current
spouse and your children from a previous
marriage. If you remarry later in life, your
spouse and your adult children may not
develop a close relationship, which could
complicate matters when you die.
With a traditional family, estate assets are often
inherited by the surviving spouse and eventually
passed down to the couple’s children. Blended fam-
ilies, however, may require a more detailed strategy.
Start by having an honest conversation with your
spouse (or fiancée) about your separate and shared
finances and goals for the future.
Think ahead
A prenuptial agreement is a written contract be-
tween prospective spouses that states how assets will
be owned and distributed during the marriage, in the
event of divorce, and at death. Each spouse’s finan-
cial rights and responsibilities are predetermined and
clearly spelled out, and the contract can be altered or
broken only with the consent of both parties.
Prenuptial agreements are not for every-
one, but they could help reduce conflict be-
tween a surviving spouse, your adult chil-
dren, and other family members.
Useful trusts
Placing assets in a properly structured
living trust makes it more difficult for
someone to contest your will and also
avoids probate. The assets would be avail-
able to your heirs more quickly, and your
private information would be kept out of
the public domain.
A qualified terminable interest property (QTIP)
trust is a marital trust typically used in conjunction
with a bypass trust. When you die, your spouse re-
ceives a lifelong income from the assets in the trust.
After your surviving spouse dies, the remaining trust
assets are distributed to your children, or other des-
ignated heirs, according to your specific instructions.
A QTIP trust might be a viable option if you’re
certain that a permanent financial relationship be-
tween your spouse and adult children will not be a
constant source of tension and frustration. If you are
uncomfortable making your children wait until your
spouse’s death to receive an inheritance, it might
make more sense to eliminate the financial connec-
tion between your surviving spouse and your chil-
dren.
Pick your approach
One common arrangement is simply to designate
a specific percentage of estate assets to be distribut-
ed outright for the spouse, each child, and any other
heirs. This way, everyone shares in the appreciation
or depreciation of the assets.
Another method involves allocating assets to var-
ious heirs based on specific financial needs or bene-
fits. For example, a surviving spouse might inherit
the home and retirement accounts, while the children
might receive other financial assets such as shares of
a business, family heirlooms, or the proceeds of a life
insurance policy.
The beneficiary designations on all your retire-
ment accounts, brokerage accounts, and insurance
policies should also be updated and consistent with
your overall estate plan. If your children are adults,
you may want to keep them informed about your de-
cisions so that everyone knows what to expect.
Trusts incur up-front costs, often have ongoing ad-
ministrative fees, and involve complex tax rules and
regulations. You should consider the counsel of an
experienced estate planning professional and your
legal and tax advisors before implementing a trust
strategy.
(Charles Sims Jr., CMFC, LUTCF, is President/
CEO of The Sims Financial Group. Contact him at
901-682-2410 or visit www.SimsFinancialGroup.
com).
