Did you recently get married? If so, congratulations! You and your spouse are probably enjoying your time as newlyweds and celebrating your new life together, so you may not want to take time right now to think about financial matters, especially with regard to estate planning.
However, major life events—such as marriage—can have a big impact on your estate plans. That’s especially true if the event is a second marriage. You each probably have assets that you’ve accumulated prior to your marriage, and you may have children from those previous marriages.
Thinking about one’s death may not be pleasant, but it’s important you take some time to figure out how your assets will be distributed in the event of your passing. Without a plan in place, it’s possible your assets could get distributed in a way that isn’t consistent with your wishes.
Below are three tips on how to manage your estate planning goals if you recently entered into a second marriage. Talk these over with your new spouse to see how they may play a role in your estate plan.
1. Carve out assets specifically for your children.
Consider the following scenario: You and your spouse each have children from previous relationships. You fail to establish any kind of formal estate plan. Upon your passing, all of your assets transfer to your spouse.
Then, when he or she passes away, all of the assets are left to his or her kids. Your kids from your previous relationship are left empty-handed.
Of course, this probably isn’t what you want for your kids, and it’s likely not what your spouse wants either. That’s why it’s important for you and your spouse to specifically decide which kids get which assets.
Then you may want to use trusts to spell out your wishes. You can use a trust to direct certain assets to your spouse and other assets to your kids. That way, everyone gets taken care of and no one is left out of your estate plan.
2. Check all your beneficiary designations.
Here’s another scenario that is very possible if you don’t take action. You probably established life insurance, 401(k) plans, IRAs and other beneficiary designation accounts during your first marriage, and you probably listed your first spouse as the primary beneficiary. Did you ever change or update those designations?
What if you passed away and all of those accounts were left to your first spouse rather than your current one? Unfortunately, beneficiary designations usually can’t be challenged in court. If you forget to change your beneficiaries, your current spouse would likely have no legal recourse.
Take time to inventory all of your accounts with beneficiary designations, and then make sure they’re updated to accurately reflect your wishes. During this process, you may also find you need additional life insurance to adequately protect your new spouse and your children.
3. Talk to your family.
The last thing you probably want is your children, stepchildren and spouse fighting over assets after your death. Communication can go a long way toward preventing this.
Talk to your family members about your wishes, plans and why you are taking certain steps. Let them know your reasoning, but also listen to their concerns. They may bring up points you haven’t considered.
It’s important for them to hear this information directly from you rather than at a will reading in an attorney’s office. That will give them a chance to understand and better absorb the information.
Need help developing your estate plan? Foote Financial Group would welcome an opportunity to help you and your new spouse clarify your estate-planning goals and develop a plan of action.
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