While estate planning can be complex for all families, it can be especially complex for those in other than a first marriage. Ensuring that everyone is treated fairly can be a challenge, but these tips can help:
- Sit down with your spouse and discuss both of your desires. Make a list of assets you each brought into the marriage, as well as assets acquired after your marriage. Discuss how you want these assets distributed after your death. Your estate planning documents should support these decisions. Keep in mind that even if you have a will, your spouse can often override the terms and elect to receive a statutory percentage of your estate. To prevent this, you typically need a prenuptial or nuptial agreement.
- Determine whether trusts are necessary to protect your children's inheritance. When assets are left outright to your spouse, he/she controls the ultimate distribution of those assets. You may want to use a qualified terminable interest property trust (commonly referred to as a QTIP trust) to protect your children's interests. Assets you designate are placed in this trust, with income distributed to your spouse during his/her lifetime. After your spouse's death, the principal is distributed to your heirs.
- Review beneficiary designations and life insurance amounts. It's not unusual to forget to update beneficiary designations for retirement accounts, individual retirement accounts, and life insurance policies. These assets will be distributed to your named beneficiary, regardless of the terms of your estate planning documents. Thus, take a look at those designations to ensure they are coordinated with your estate plans. While you're at it, review how much life insurance you have. You may find that you need more life insurance.
- Check how your property is titled. Jointly owned property automatically passes to the co-owner. You cannot change this distribution through a will.
- Discuss your plans with your family. Especially in situations involving step-parents and step-children, you should communicate your plans for your estate. You don't want your children to believe that your spouse has unduly influenced you or that you don't care about them. Being open and upfront about your estate plan will hopefully prevent misunderstandings after your death.