Remarriage and Estate Planning

While property is clearly divided at the time of a divorce, other issues including future estate planning tend to be neglected. Once a remarriage happens, it's important that all possible options are considered so that everyone is provided for in the future. Nothing in a divorce can ever preclude a person from drafting a new will, but there may be some portions that you must include.

Dealing with Divorce Settlements

In some instances, couples will draft estate planning requirements into the divorce settlement. This is commonly seen in two different scenarios: children and shared accounts. As a general rule, always review divorce settlement papers before drafting a new will.

Children: When it comes to providing for children, many states require that the couples each purchase life insurance plans in the event either person dies before the children are 18 years old. Additionally, couples may require that children are always drafted into wills or that a trust be formed to provide for the children. If any of these items are specifically listed in a legally binding divorce settlement, the ex-spouses are obligated to continue using this method in the event they remarry.

Shared Accounts: Some retirement accounts, such as military pensions, cannot be divided in a divorce. Instead, the court issues an order and the applicable funds are earmarked for the non-military spouse. In addition, couples may require that the account is specifically mentioned in the owner’s will. This is more for convenience and ease of administration than for inheritance purposes, but may still be required.

Premarital Agreements and Protecting Your Assets

For those taking their second walk down the aisle, it's important to protect their various assets. A premarital agreement specifies both people’s property before marriage, typically called separate property. In the agreement, specifically enumerate all wealth accumulated before the marriage. This means any investments, property, cars, inheritances, and retirement accounts. Once everything is completely listed out, write a simple requirement and reason for the agreement such as:

“This premarital agreement is hereby entered into on June 1, 2011 by Sam Blue and Amanda White for the purpose of defining their property before marriage. In the event of a divorce, the couple agrees that all remaining assets mentioned in this contract are considered separate property owned by each individual.”

Sign the document, date it, and have two witnesses also sign for validity. After ten years of marriage, if all the assets have merged or been liquidated, simply destroy the contract.

Drafting a New Will, Revoking the Old

Regardless of what is required in the original divorce papers, it's imperative that both people draft new wills. The first section of the new will must cancel out the old will. The necessary wording for this to happen must be, “I hereby revoke all prior wills and codicils.” Additionally, contact anyone with an existing copy of the old will and ask that they destroy the document.

Once the old will is revoked, draft the new will according to the new situation. If there are any children, mention specifically how they are to inherit in proportion with the new spouse. Be specific, using the names of everyone meant to inherit. If more children are a possibility, add the phrase: "Reference to my children or my child, shall include children born later and children adopted by me.” This ensures that children from the current marriage are equally protected and provided for as pre-marriage children in the will. If all the children involved are adults, it is common to leave all premarital assets to the children and any assets from the marriage to the spouse.

Tying Up Loose Ends

Estate planning for a new family does not end with the drafting of wills. Go through the financial paperwork from before the marriage and find all life insurance (both whole and term), IRA’s, 401(k)’s, as well as all pension account information. All of these accounts do not go through probate and are instead transferred through the private banks. Even more importantly, all of these accounts have a beneficiary(s) listed. Check the named beneficiary and make certain it is the right person. Often an old spouse or adult child is accidentally left on as a beneficiary, which can lead to some disagreements or will contests.

For those serving in the military, provide the pension office with the new marriage certificate. This procedure ensures that time begins tolling on the pension account for widow/widower pension benefits upon death.

Creating Individual Trusts: When It’s the Best Thing to do

If a potentially lengthy will traveling through probate does not sound like a good route for handling inheritances, consider creating individual trusts. The possibilities for trusts are endless and all trusts created during the life of the couple are private and will not pass through probate. A common estate plan for people remarrying follows a route of providing the deceased person’s maximum allowable amount to go to the children. The rest is left in a Q-TIP trust for the care of the surviving spouse. Upon the spouse’s death, the funds are distributed to both people’s heirs and estate taxes are paid.