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Navigating Estate Planning for Blended Families
Key Considerations for Second Marriages
Estate planning is a vital component of securing your family's financial future, especially when it comes to second marriages and blended families.
While love knows no boundaries, the complexities of managing assets and ensuring your intentions are met after you're gone can be challenging.
In this blog, we'll explore essential estate planning considerations for those in second marriages and blended families. From how assets are titled to the role of trusts and the significance of pre-nuptial agreements, we'll help you navigate this intricate terrain to ensure a seamless transition of your assets to your loved ones.
Estate Planning Items to Consider for Second Marriages and Blended Families:
How assets are titled. It is important to be aware of how assets are titled as the title determines how property will pass upon death of the owner. If a married couple owns property, “joint with rights of survivorship,” said assets pass automatically to the surviving spouse. This includes real property and bank accounts.
Alternatively, if the surviving spouse is not included in the title, there may be delays or challenges in passing the asset, if that is what was intended. It is also possible that a former spouse is listed on the title of an asset, which as you can imagine, can create complications.
Another common planning tool in second marriages is to provide the surviving spouse, who does not own the primary residence of the couple, with a life estate. A life estate provides the surviving spouse with the right to possess and use the property during their lifetime and holds this spouse responsible for the costs of maintaining the property. Before providing an individual with a life estate, there are many things to consider such as potential expenses, tax consequences, effects on Medicaid eligibility and more.
Beneficiaries on accounts. It is always important to review beneficiaries on all your accounts periodically, especially after a major life change. You may be surprised to learn who your listed beneficiaries are. Listing a loved one as a beneficiary on your financial accounts can be a great way to gift assets. An added benefit is that assets passed this way avoid the probate process.
The probate process. A Will is a document that outlines how an individual’s assets are to be distributed upon death. When a person who has made a Will dies, their Last Will and Testament must be filed with the Surrogate’s and undergo a court procedure known as probate. Probate proceedings can take months, and even years, to resolve, placing a financial burden on those intended to benefit from the decedent’s estate. Additionally, during probate proceedings, Wills become a public document, and certain family members must be notified and given an opportunity to contest it.
The intestate process. If you die without a Will, you are said to have died intestate. When you die intestate, New York state law determines how your estate is divided. As such, your estate assets may not pass the way you intended them to. For example, if you are survived by a spouse and children, your spouse is entitled to receive $50,000 or one third (⅓) of your estate, whichever is greater.
Trusts. There are many types of trusts, but as a basic rule of thumb, trusts allow you to avoid the expense and delays associated with the probate and administration processes. Trusts also avoid involving multiple courts if you own property in more than one state and allow assets to pass privately as trusts are not public record.
To learn more about the differences between Wills and Trusts check out our previous blog here.
Pre-Nuptial Agreements and Elective Share Waivers. If you enter into a second marriage and you intend to disinherit your spouse upon your death, your spouse must agree to this in an agreement, such as a pre-nuptial agreement or an elective share waiver. Under New York state law, each spouse has a right of election to receive the larger of $50,000 or one third (⅓) of the deceased spouse’s net estate, even if the decedent did not provide for the surviving spouse in his or her Will, or executed a Will which intended to leave the surviving spouse with less.
Life Insurance. Life insurance can be a great estate planning tool. Life insurance policies allow a couple to ensure that no matter who passes away first, children can receive an inheritance while the bulk of the assets can remain with the surviving spouse to use and enjoy for the remainder of their life.
Although life insurance can be a useful tool, it is important that the life insurance policy is right for you and your family.
Estate planning is a deeply personal endeavor, and it takes on a unique significance when second marriages and blended families are involved. The decisions you make today will not only impact your own financial security but also the well-being of your spouse, children, and stepchildren in the future.
From the titling of assets and reviewing beneficiaries to utilizing trusts and considering pre-nuptial agreements, these are all tools at your disposal to customize your estate plan to your specific needs and desires.
By consulting with an experienced estate planning attorney, you can navigate the complexities with confidence, ensuring that your legacy is preserved as you envision it, no matter the intricacies of your family situation.
Remember, thoughtful estate planning can provide peace of mind and financial security for you and your loved ones, bridging the gap between the past and the future. Click here to contact us today and begin your estate planning journey.
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