According to the Pew Research Center, 70% of Americans get married sometime during their lifetimes. However, every one of these marriages eventually ends. About half end in divorce. And the other half end in death. About 70% of those who have been divorced or widowed get married again. And it has been reported that children are involved in over half of these remarriages. Is it not wise to plan for it.
If you do not have a will or trust, upon your death, your surviving spouse would have a right to take a share of your estate under the laws of intestate succession. Your surviving spouse would be entitled to take the first $150,000 of your estate, in 2017, and the remainder would be split 50/50 between your surviving spouse and the children from your prior marriage(s).
For example, we saw a case in which a widowed fellow remarried after his wife of more than 30 years passed away. His children from the first marriage were all grown up and out of the house. Two weeks after the remarriage, he died. He had done no estate planning, no will, no trust, no nothing. His estate was in excess of $800,000. Because he had left no instructions, his wife of only two weeks received nearly half a million dollars from his estate, whereas his children only received a little over $300,000. This is probably not what he intended, but we will never know because he had no plan.
With first marriages, the most common plan that we prepare is the “Honey I love you” plan, which is “Honey I love you, I leave it all to you. Our other beneficiaries get it when we are both gone.” The estate plans that we prepare in our office with remarried couples vary widely with the length of the marriage, the ages of the children at time of remarriage and the amount of property that each party brings into the marriage.
With remarriages, the parties are generally older and may have accumulated some property before the marriage. Early on in the remarriage, it is quite common for each spouse leave nothing to each other and leave all of their separate property to their children of the first marriage. Sometimes this never changes. The couple continues to split all the bills and keep their property separate. We see this happen the most often with couples who are both bringing significant assets into the marriage and both have grown-up children from their prior marriage no longer living in the family home.
As the remarriage lengthens, we oftentimes see a shifting of the beneficiaries of a couple’s plans. Sometime after the five or ten year mark in the remarriage, each spouse may want to start benefitting one another. They still may maintain their own separate property, but they have a “Honey I love you” plan. They set up lifetime trusts for each other so that the surviving spouse has access to the deceased spouse’s assets if needed. Upon the surviving spouse’s death, anything left in each spouse’s trust is left to each spouse’s children from their prior marriage.
After the fifteen or twenty year mark in the remarriage, we regularly see couples commingling assets or splitting their assets 50/50 regardless of what each spouse brought into the marriage. The plan typically is a “Honey I love you” plan. After the surviving spouse’s death, assets in each spouse’s trust could go to that souse’s children or each spouse could have the same beneficiaries. Instead of splitting up the marital estate one-half to each family, each spouse leaves the assets in their trust in equal shares to both their and their spouse’s children.
When children are minors at the time of the remarriage and are raised in the marital household with their biological parent and a step-parent Brady Bunch style, the estate plans of both spouses tend to have common beneficiaries. Both of the spouses are likely to include in their plan all the children of both spouses, in equal shares.
When there are children of both spouses from prior marriages, and then the couple has a joint child together, estate plans tend to change. We often see the joint children being favored over the children of the first marriages. Sometimes the joint children get a share from each parent, whereas the children from the prior marriage get only a single share from their biological parent. Sometimes the joint children share in the entire marital estate, with the children of the prior marriages receiving nothing. This is most common when the children of the prior marriages never lived in the marital home and were raised by the other biological parent..
When only one of the spouses has children of a prior marriage, the plans depend upon the relationship the step-parent has with their spouse’s children. If the children are being raised in the marital home by both spouses, we often see both spouses with a “Honey I love you” plan in which both spouses leave everything to the kids after the surviving spouse’s death. If it is a later in life remarriage after the kids are out of the house, we often see each spouse with their own beneficiaries until about the ten year mark, after which both spouses are inclined to leave everything to the kids after the survivor’s death.
With second marriages and blended families, there is no right or wrong. You should do what you feel is best for you and your loved ones so that you can control your property while you are alive and well, provide for you and your loved ones when you are mentally disabled, and after you are gone, you can give what you have to whom you want, when you want, the way you want, all at the lowest overall cost to you and your loved ones.
By Matthew M. Wallace, CPA, JD
Published edited August 13, 2017 in The Times Herald newspaper Port Huron, Michigan as: Planning permutations for blended families