Before You Tie the Knot: When Love Comes Calling the Second Time Around Take Action on Your Estate Plan


Love makes the world go ’round. That’s a wonderful warm thought and a good formula for the world these days. But when it comes to the courting that precedes spousal relationships, the bedazzled partners may overlook the “business” side of their relationship.

In this case, business equates to estate planning. Every family needs an estate plan. Failure to give thought and take action on creating an estate plan before couples tie the knot can create big problems. Fortunately, there are tools and workarounds to take the intricacy and awkwardness out of estate planning in second marriages.

This is especially true when one or both partners is entering into a second marriage. Second marriages are on the rise. In fact, according to Pew Research Center, 40 percent of new marriages include at least one person who was previously married. And 20 percent of second-time weddings include two people who have both been married before.

Blended Families: Complicated Estate Planning

These statistics spawn yet another social construct: blended families. “Blended family” is the label given to families in which one or both spouses have children from a previous marriage. Blended families are on the rise, and the relationships they involve are complex. Survey any estate attorney. More than likely they’ll tell you that blended families make estate planning complicated. 

The plot thickens because the question arises: How can you make sure you take care of your current spouse and take care of your kids from your previous marriage?  

A Traditional Estate Plan Just Won’t Do

Frequently, the partners think they can use the same type of estate plan that they did in their first marriage. They believe they can pass on assets through a Will which typically directs that most assets are left to your surviving spouse and upon his/her death, the remaining assets go to your common children. But in a second marriage this course of action will not work. In fact, if you’re in a second marriage and go down this path, you could end up shortchanging the kids you shared with your first partner and prevent them from receiving an inheritance.

Make missteps or omissions in estate planning in marriage number two, and even the best of relationships between your biological children and your new spouse could fall apart. If you predecease your new spouse, the situation could become ugly when your kid’s expectations regarding inheritance differ from the thinking of spouse number two.

As If You Disinherited Them

When you leave all your assets to your second spouse and share kids with the first, your second spouse owns your assets outright and is not required to pass anything to the children from your previous marital relationship. What’s more, if your spouse has kids from a first marriage, he/she can pass all the assets they inherited from you on to those kids and bypass your kids entirely. This effectively disinherits them.

The situation escalates if and when your second spouse remarries. Under traditional first-marriage estate planning, your second spouse would own your assets outright and his/her new spouse would be free to spend or waste your hard-earned money and investments. Consider the nightmare of your second spouse remarrying someone you’d never dream of having access to your assets—say a profligate spender whose actions go against everything you’ve represented as a fiscally responsible and conservative saver.

Unfortunately, these scenarios are all too common. Developing a plan may seem complicated and uncomfortable to discuss or even think about. That discomfort has caused far too many couples in second marriages to avoid the estate planning issue. Don’t be one of them. You don’t want to short-change your children.

Workarounds to Distribute Your Assets Fairly

The good news is you can use different estate planning tools to avoid these dilemmas and make sure all your loved ones are taken care of according to your wishes. One of the best ways to circumvent these issues is to set up a trust. For example, a special type of trust called a Qualified Terminable Interest Property (QTIP) Trust is an excellent estate planning tool for individuals with children from a previous marriage. A QTIP allows you as the grantor to provide for your spouse until death or remarriage and then have the remaining assets distributed to your children.  Under a QTIP, income is paid to your surviving spouse, while the balance of the funds is held in trust until your spouse’s death. At that point, it is paid out to the beneficiaries specified by the grantor. 

By forming a QTIP, you are able to take care of your current spouse while also ensuring that your assets pass on to other beneficiaries such as your children from a first marriage. Also, all assets included in the trust are protected from the surviving spouse’s creditors. Estate tax is also not assessed at the point of the first spouse’s death but is instead determined after the second spouse has passed

Choose a Trustee Wisely

With a QTIP, you must assign at least one trustee to manage the property of the trust. It’s important to choose your trustee wisely, because this individual will make all the financial decisions about investing and distributing assets after you have passed. This individual needs to be clear-headed, diplomatic and adept at managing money which is helpful in avoiding conflict. You might also consider appointing a professional trustee such as a CPA, an attorney, or a corporate trust company. But be aware that in the case of a professional trustee, the administration expenses and fees can be substantial.

Immediate Inheritance

There’s also the option of leaving an immediate inheritance to your children upon your death. This eliminates your kids having to wait to receive the assets until some undetermined time when your spouse dies. Should your estate not be large enough to make an upfront gift, you could fund their inheritance with an insurance policy that passes to them as beneficiaries outside of a Will. The insurance proceeds would provide immediate liquidity for the children.

There’s Always a Prenup

In New Jersey, a spouse cannot disinherit a spouse. The surviving spouse has a right to a percentage of the estate. That right is only enforceable however, if the surviving spouse sues to obtain their interest. A prenuptial agreement—or a post-nup—can play a positive role in the estate planning process. With these contracts, both parties agree in advance about estate distribution. An equally important condition: They commit that they will not sue to contest your estate planning documents. If there’s an agreement (which is essentially a contract), your new spouse may have waived the right to sue.

Money in the Bank

Sometimes one or both of the spouses involved in a second marriage has independently brought assets to the marriage from prior employment earnings, a family inheritance or a deceased spouse in a previous marriage. The way those assets were acquired could impact the way each spouse values those assets and could contribute to the strategy each uses in estate planning. When determining your course of action, a lot will depend on what assets your new spouse already has in his/her name, what his/her income is, what his/her savings are, how the assets are held and, as importantly, what the needs of your kids from your previous marriage are—additionally, whether any of your children from your first marriage have special needs that could require additional funding.  

It’s important to remember that while each case is unique, there’s one constant. Everyone needs a written estate plan. If you’re contemplating a second marriage, schedule an appointment with your estate attorney and get these matters ironed out before you walk down the aisle.

At The Nan Gallagher Law Group, our estate planning guidance is always crafted to serve your specific need. Call us at 973.998.8494 to schedule an appointment. We can help you set up a QTIP and other types of trusts, provide guidance and unwind the complex estate planning situations that arise when dealing with second marriages.