Estate planning for couples in second marriages, when each spouse has children from a prior marriage, requires a few extra planning steps.
When each spouse dies, they may want his or her children to receive an inheritance with the remainder going to the surviving spouse.
In many states, a surviving spouse can choose to receive a portion of the other spouses’ estate by filing a petition in Probate Court, if they have not received an equitable share needed for their support. New York calls these shares a spousal elective share. It is $50,000 and a statutory portion of the estate, whichever is greater. The share ranges from 1/3 to 1/2.
Another strategy is using a QTIP or "Qualified Terminable Interest Property" in one’s testamentary plan found in their will or living trust. This is a type of trust designed to preserve the marital deduction for estates that may be subject to estate tax. The federal estate tax exemption is $11.2 million per person in 2018. In addition to federal estate tax laws subject to change down the road, some states also have their own state estate tax.
People in second marriages very frequently want to provide for their spouses when they die. However, they also want to be certain that their own children are able to inherit the remaining assets after the death of the second spouse. This can be done by creating a marital trust for the benefit of the surviving spouse with the remaining assets in the trust going to their children after the second spouse dies. A QTIP may not accomplish the objective of an immediate inheritance for children. Our firm, Grimaldi & Yeung, can explore your specific family situation and determine if a QTIP or other trust would be favorable for you.
Another option to discuss is a postnuptial agreement, where the surviving spouse waives his rights to an elective share or executes wills or trusts that designate assets to children at their death. We can also craft your estate planning documents, so an amount equal to one-third of the augmented estate will go outright to the surviving spouse and have the balance distributed to the children. Finally, spouses may choose to designate their children as beneficiaries on IRAs and insurance policies, instead of the surviving spouse.
There are more than a few ways to make estate planning work in an equitable fashion for everyone in the new blended family. Grimaldi & Yeung LCP is ready to help you create the plan that will work best for your unique situation.
Reference: nj.com (October 10, 2018) “Second marriage? How to make sure your children get an inheritance”