Every family is unique and comes with their own unique circumstances. When it comes to estate planning, one should keep in mind how their particular circumstances will affect how they’d like their assets to be distributed upon their death. Those who have remarried have various ways that they can distribute their personal assets and property once they pass away. With this in mind, there are certain steps to take to make sure your estate plan accurately reflects and is set to carry out your wishes.
Setting up a Trust
Married couples usually leave everything to their spouse in their wills. However, one should be mindful of how this may impact the future distribution of your assets. If you pass away, everything goes to your spouse. Although this may be your wish, it is important to consider that in the future your spouse may not want to share your assets or anything with your children that you have from another marriage/relationship. There is a way that can be beneficial to both your spouse and children, which is to simply put your assets into a trust that the spouse can use until they pass away. When your spouse passes away, everything that is in the trust will automatically go to your children. The downside to this is, if your spouse is young, your children might not receive any money or any part of your estate. One way to make sure they receive at least something is by designating your children as beneficiaries of your retirement account(s) or life insurance policies so they are able to receive an inheritance without having to wait.
Handling your Retirement Accounts and Life Insurance
Having a life insurance policy is one way to provide for your family members. By taking out this type of policy, your children will benefit by having them listed as beneficiaries. One should understand that life insurances and retirement accounts such as 401(k) and IRAs will not be passed down through a will. Such accounts will go directly to the beneficiary you have named, which will take priority over anything written in your will regarding the matter. That is why you should always make sure that your beneficiaries are up to date, especially after a divorce, If you leave your ex wife/husband as a beneficiary, all of your retirement savings may end up going to them, which is not favorable.
Having a Living Will and the Power of Attorney
Although unpleasant to consider, you should know that if you become terminally ill, you need to have documents prepared that will ensure that your end-of-life wishes regarding your medical care are recognized (in case you aren’t able to communicate them yourself). This is known as a living will and is one of the documents that should be completed when planning your estate. Another important document is a power of attorney, which gives someone of your choosing the ability to make medical decisions on your behalf if you are incapable of doing so. Having a financial power of attorney is also important, as this gives an agent the ability to have control of your finances and pay off any outstanding debt or taxes after your death. Having a calm and cooperative discussion with your family and loved ones is highly recommended to make sure that you preemptively ensure that each of these roles is filled with a qualified and trusted candidate.
A prenuptial agreement can be very beneficial, as it sets the rights and obligations which spouses must follow during the marriage and in the event that the marriage is dissolved. Such an agreement may be useful if you are planning on remarrying and having children from a previous marriage. A prenuptial agreement may come in handy, for example, if you’d like for your new spouse to live in your home, but also that your children inherit the house after you and your spouse pass away. Similarly, you may also want for the vacation home that you inherited from your parents goes to your children, not your spouse, which is also possible with a prenuptial agreement.
What Will Happen If I Do Nothing?
Doing nothing will result in all your assets being distributed by the intestacy laws of whichever state you reside in. This means that you will have no say in how your property will be divided amongst your children and spouse. As a result, your stepchildren may not inherit anything that you may want them to.
It’s important to understand how your family may be affected when it comes to estate planning. To ensure that your assets are distributed on your terms, we highly recommend consulting a licensed estate planning attorney who can help guide you through the estate planning process.