Getting Remarried? Protect your assets and your interests

Retirement plans
Getting remarried? Protect your assets and your interests

By Deborah Nason | Special to CNBC.com Published: July 28, 2016 9:00 AM ET
http://www.cnbc.com/2016/07/28/getting-remarried-protect-your-assets-and-your-interests.html


“Getting remarried … Oh, what fun when it comes to estate planning,” said certified financial planner Mark LaSpisa, president and managing advisor of Vermillion Financial Advisors.

“The biggest challenge is, how does anyone reconcile preserving assets for children from a prior marriage while taking care of one’s commitment to a new spouse?” he said.

LaSpisa recommends thinking ahead and considering questions such as what your goals are, how your existing family and new spouse will relate to one another once you’ve passed away, and who will be in charge of the money.

Fearing the new spouse

“The fundamental issue is that the heirs of a couple remarrying have more to fear from the new spouse than from the federal estate-tax collectors,” said lawyer lawyer John J. Scroggin, an accredited estate planner and partner with Roswell, Georgia-based law firm Scroggin & Co. He gives some examples of why:

• “Every state but Georgia gives rights to a spouse to make an elective share against a decedent spouse’s estate or have a right to community property,” he said. “Therefore, a portion of an estate could go to the new spouse even if the decedents will disinherits the spouse.”

• “Unless you expressly exclude your new spouse from your will, he/she generally has an intestate right against the probate estate in most states.”

• “If a client has an ERISA retirement account, the spouse may have certain rights to it, whether it is a defined benefit or a defined contribution plan,” he said. “IRAs are not subject to the same rules.”

• “In many states, the surviving spouse has rights to ‘certain’ personal property, even heirloom assets,” he said. “Sometimes it is based on values; sometimes it is listed in the statute (e.g., family Bible goes to the spouse).”

• “When there are no contrary estate documents (will, POA, medical directive, etc.), the new spouse is often statutorily named as the first decision-maker, with the power to cut off access to anybody who might wish to be involved in the affairs or care of the incapacitated spouse.”

The ex-spouse may still be involved, too, said Susan Green, lawyer and certified financial planner with Wescott Financial Advisory Group. “Assets could still be left to your ex-spouse if you have not updated your beneficiary designations, even if your intent was to provide for your new spouse and/or children instead,” she said.

Beware that you might be contractually obligated to keep your ex-spouse as beneficiary of a retirement account or life insurance policy for a certain period of time, Green added.

Update considerations

Green offered some issues to consider when updating estate-planning documents:

• “Consider whether or not you would like to name your new spouse as your trustee/executor/agent,” she said. “Disposition of assets becomes particularly complicated when there are children from prior marriages.”

• “Review your assets and decide if you will hold them individually or jointly,” she said. “If held jointly with rights of survivorship, the surviving spouse will inherit these assets by operation of law. In a community property state … property acquired prior to marriage or through an inheritance can retain its character as separate property.”

• “If your new spouse moves into your house, you will need to decide if you want to add his/her name to the deed and mortgage,” she said. “It is important to think about where your spouse will live if you pass away first.”

• “You may need to specifically bequeath certain personal items to your children, depending on family significance and your wishes, and you should be aware of how ‘children’ is defined by your will (including just your own children or also your spouse’s children).”

Therese R. Nicklas, CFP and wealth manager with U.S. Wealth Management, said other common mistakes include not taking new home-state laws into consideration if a couple remarries and moves out of state and, if the couple owns multiple properties, not titling them into the plan (if a trust is involved).

Common estate-planning mistakes after remarrying:

1. Changing or not changing beneficiary designations
2. Comingling or non-comingling of assets
3. No new estate-planning documents
4. No prenuptial
5. Verbal instructions to loved ones
6. Retitle of primary house or failure to retitle the house
7. No purchasing of long-term care insurance or planning for the possibility of nursing-home care

Source: Mark La Spisa, president and managing advisor of Vermillion Financial Advisors


“Rewriting a plan is normally not too complicated unless your former plan includes an irrevocable trust,” she said. “Having trusted advisors [e.g., an estate-planning attorney, financial advisor and CPA] walk you through in a step-by-step manner can help you avoid many pitfalls.

“What one advisor might overlook, the other will pick up, helping you avoid having significant details fall through the cracks.”

Nicklas added that although you may have to pay for these professionals’ time, good advice and guidance can save you money in the long term. “Mistakes made by not planning properly often have costs that cannot be measured,” she said.