Parties to second-marriages and blended families often face complicated issues when planning their estate. Accordingly, the proper time to plan for second-marriages is prior to the second-marriage itself. You can read more on the subject of prenuptial agreements by clicking here.
The predominant estate planning complication facing these parties involves the balancing of interests in providing for their surviving spouse while also ensuring that their own children ultimately receive the remaining balance of their estate without resenting the surviving spouse.
Typically, this is accomplished with an estate plan that immediately distributes some portion of one’s estate for the benefit of one’s children (either directly or via a immediately), while distributing the remainder of the estate into a trust for the benefit of the surviving spouse. The surviving spouse is typically entitled to receive either the income generated by the trust or a certain percentage of the trust assets each year. Some trusts also provide that the trustee may further invade the principal of the trust for the benefit of the surviving spouse if such invasion is needed. In any event, after the surviving spouse dies, the balance of the trust would then get paid over to one’s own children.
By mere virtue of your marriage; however, your spouse has the right to claim approximately one-third of your estate. In New York State this is known as the spouse’s Right of Election. By that same virtue, your new spouse may have the right to receive the entirety of the proceeds of any qualified retirement plan in which you may be a participant, such as a 401(k) or 403(b) retirement plan. These outcomes can be avoided by having your spouse execute properly drafted waivers of those rights.
Contact us to learn more about Estate Planning for Second Marriages and Blended Families.