MONEY MATTERS

Marrying again? Planning now avoids confusion later.

Charles Sims Jr., Special to The New Tri-State Defender | 12/16/2016, 11:14 a.m.
Marrying again? Planning now avoids confusion later.

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).