Episode 8: Estate Planning and Second Marriages

Estate Planning Lawyer, Peter Klenk

What You Need to Know About Estate Planning & Second Marriages

Hello, let’s talk about death and taxes. This is Peter Klenk, trust and estate attorney, primarily practicing in Pennsylvania and New Jersey. I’ve been doing this for a long time, so it is a well-known fact that it’s hard to keep me quiet. Podcasts are a great way for me to talk and share with you guys. So today, what’s our subject?…. Second marriages.

Estate planning in the second marriage and blended families raises all sorts of issues, but not necessarily negative. It’s not just about, “hey, I have stepkids,” or “what happens if I die?” It’s also “what happens if I get sick?” and “what if somebody has to act for me or take care of me as my financial agent?” What if you’re sick in the hospital? Who speaks for you in the hospital when you have adult children and a new spouse? Do they bury you where your kids want to bury you? Who gets the ashes, all these things. If you think about them ahead of time, and you plan through them, that can head off potential conflicts. And that’s really what this is about, right? Making sure that when the music stops when the time comes, it’s as easy and as boring as we can possibly make it, and we don’t have a lot of conflict.

So, let’s talk about a few things. In your Will you have the right to say who’s in charge of your funeral arrangements. You should consider that. You’ve probably heard the stories, and I certainly can tell them, when somebody passes and the second spouse has certain ideas, and the kids have another idea. It leads to conflict, or litigation teams had to go to court about disputes about funerals and burials and whatnot. Sit down and really think about it. Do you care? If you don’t care where you’re buried, you know, though, let everyone know that “No, you don’t really care.” Be clear about who gets to make that decision and see if anybody has any opinions about it. If nobody else does, well, great. I mean, you can sort that out. However, maybe somebody really does have a strong opinion about you being in the family plot or up on the mantle. If they do and you don’t care, well, then just make sure everybody knows that you’re agreeing with whatever the plan is, but if you do have a strong wish, you have to make sure that the person you pick will do what you want. Remember, you’re dead, you can’t do anything, so if you want to be buried in a military cemetery (that’s probably where I’m going to end up), then make sure the person you pick is going to take the steps to make sure that happens, and that this is not a dispute between everybody because everybody knows now this is what you want.

Then you pick the person in your Will to be in charge to make sure that happens. This also goes with medical care… what if you’re sick, and you’re in the hospital, and you can’t speak for yourself? Who speaks for you? You might think, well, automatically, it’s my spouse, but again, look, you might have kids from a prior marriage, and personalities might conflict about things. The goal here is to make sure that your wishes are carried out. To make sure your wishes are carried out, you need somebody who will carry them out for you. So that’s why you have a medical power of attorney who is going to serve. We’ve done them where it’s the spouse, we’ve done it when it’s the kids, we’ve done it when it’s a combination. You just have to take into consideration the personalities involved, who’s going to be making the decisions and make sure that everybody understands what you want. So, these are things that you really can brainstorm about with your trusted estate attorney.

Together, you’re going the document to make sure you’ve got the right people, and it’s the same with the financial power of attorney. You might have all your assets separate from your second spouse, you might have them all together, but you have an IRA, right? Your spouse has no automatic right to manage your IRA. That’s your agent and your power of attorney. You might own the house. Who’s in charge of your financial assets, if you’re not able to take care of them? And again, it might be your spouse, it might be your kids, it might be a combination, it might be a neutral party. This is something that you need to talk to your trusted estate attorney about and come to an understanding given your specific situation. What was good for one person might not be good for you, and then your Will you know what does happen to your things when you go you know, once you’re in a separate marriage, you might have a house, who’s going to live in the house? Who gets the house? You might have assets that you want to pass to your children. As soon as you pass, even though your spouse is still alive will that leave your spouse homeless? Will that leave your spouse without enough money? These are all things you need to think through. Part of that plan is the potential of having what’s called a “contract to will” in your will, where you and your spouse have a binding arrangement or contract as to what will happen to the things after one of you dies. This can solve a lot of problems. Like, again, the house. You want your spouse to stay in the house after you die until they don’t want to stay there, but they need to pay the bills, they need to keep it up, they need to maybe not move in with bunch of bikers.

As soon as they leave, your children are free to sell the house. Well, that can be all spelled out and can be in your Will as a binding contract, right? There’s nothing to negotiate after your death, because it’s already all spelled out. Same with, perhaps, your money. We can set it up so a certain amount of money goes to your spouse until they die, say $5,000 a month, to make sure that they’re okay. And then when they pass all the assets have been held in a trust. They’re not subject to your spouse’s claims or claims by your spouse, his children, and that is your spouse’s death, they go to your kids – lots of ways to solve these issues, folks.

You just need to sit down with your trust and estates attorney and brainstorm with them and make sure that you’ve thought it through and put the right people in the right positions and thought about the needs of your spouse if you die. And you know, you want everybody to be happy but sometimes it just isn’t impossible, or maybe you don’t want it to be. But it’s about appearances to and being fair, right? Ruffled feathers, ideally, it’d be good if all the other people who are still alive, can still have Thanksgiving together and stomach each other for at least a couple hours, once a year, rather than, you know, being torn apart by what happens after your death, because of unnecessary conflicts that could have been avoided. Some of these things that we talked about can be addressed right up front by making transfers while you’re alive.

For example, it could be that the best way to handle your situation is to get a life insurance policy owned by your spouse and your life. And if you drop dead, I get the cash but all the family things that you have maybe the business or the real estate, the beach home, that goes to your kids, your spouse probably doesn’t want all that stuff, they just want the cash. Sometimes it’s the other way around, maybe you’re married a long time, you and your spouse have invested a lot of time in the vacation home, but you own it, maybe it really should go to your spouse, not the kids, maybe they don’t care. So maybe they want a life insurance policy. You get a life insurance policy, you pass, kids get the cash, spouse gets the house, maybe that’s the best way to work things out. It also could be that if you you’re not liking the idea of the contract to will and having your kids wait after you die, but you want to avoid conflict, you might want to form any revocable trust or make transfers to your kids directly and do a while your alive. That way, when you go it’s got nothing to do with your estate, it’s something you did, when you’re alive, right, everything was transferred out.

If you’ve been married a while, you may want to treat all the kids from both sides of the family equally. Well, that’s fantastic. And again, very nice, but it needs to be spelled out clearly in the document so that when you say descendants, you mean descendants of yourself and your spouse, not just your descendants. The document needs to be clear to avoid potential conflicts or maybe excluding somebody you really wanted to include in the process.

Now these are just the highlights, and there’s other things that might come up when you’re doing your estate planning and making sure that the kids are treated right and treated in a way that you both want them to be treated.

If you have questions about your family and your blended family in Pennsylvania or New Jersey, I’d be happy to talk to you. Call and set up an appointment and we can brainstorm. If you’re not in these states you can find a trust and estates professional near you and talk to them and make sure you bring this up. I have had people talk to me for almost an hour until they say “oh, by the way, that one kid over there – that’s not my kid!” You want be open with your trust and estates attorney about if there’s a stepchild involved or somebody you’ve treated as your child your whole life that’s not really your child because that needs to be really clear in the document.

It’s been great talking death and taxes with you. You go have a great day and I’ll talk to you again in the next podcast. Until then, it’s Peter Klenk, trust and estates lawyer.