Second Marriage Estate Planning: Challenging and Rewarding

— Mary Anne Vance, Attorney at Law


Jane and Robert have been happily married for 12 years. Robert has a son and Jane has a daughter from prior marriages. They have not written new Wills since their marriage to each other because they are uncertain as to how to divide their estate when one of them dies. Because they have no Wills, their estate is controlled by a "Will" the Washington State Legislature wrote for them. This state-mandated "Will" operates only when a person fails to write their own Will.

Surviving Spouse and Children: The 50/50 Rule
The default "Will" written by the legislature says that Jane's and Robert's "community property" — that is, property they acquired in the past 12 years since their marriage — passes 100% to the surviving spouse. However, their "separate property" — that is, property they owned before their marriage to each other — will go 50% to the surviving spouse and 50% to the deceased parent's child or children from a previous marriage.

A painful example of how this "50/50" division works: If the home Jane and Robert lived in together for 12 years was bought by Robert before the marriage, then at Robert's death Jane will inherit only 50% of the home and Robert's son will inherit the other 50%. What becomes problematic is that Jane would likely want to continue to live in the home, but she only owns half of it; Robert's son owns the other half. She will likely pay 100% of the mortgage payments and home maintenance costs because Robert's son may not be financially able to contribute payments. Robert's son may decide he wants his 50% share in cash, so he could force Jane to either sell the home to a third party, or force Jane to buy his 50% share of the house. This situation puts Jane in a difficult situation, and there is little that she can do other than continue to pay all the bills, sell the house, or buy out Robert's son's 50% interest.

To prevent this outcome, it is better if Jane and Robert write Wills specifying that the surviving spouse inherits 100% of the home and specifying what assets, if any, the children will inherit. Another solution is to simply name the children as beneficiaries to a life insurance plan or IRA, and leave nothing else to them in the Will. The Will would leave "all my estate" to the surviving spouse. The children would inherit money directly from the life insurance policy or IRA. Dividing the assets in such a way can help prevent future quarrels among the family, especially during this difficult time.

Surviving Spouse and In-Laws: The 75/25 Rule
A second painful example of what might happen if Jane or Robert dies with no written Will: Even if they had no children but their own parents were living, the parent would inherit from the deceased child. The default "Will" would leave 25% of the separate property to the deceased spouse's parent and leave 75% of the separate property to the surviving spouse. The result is that if the home was Robert's separate property, after his death Jane would co-own her home with her in-laws, which can cause similar co-ownership turmoil as in the previous example (above), where Robert's son inherited 50% of the home. To avoid co-ownership with a parent or a child, Jane and Robert should write Wills leaving the home as well as other assets to the surviving spouse. If Jane or Robert want to leave assets to a parent or a child they should specifically state that in their Will.

Financial and Medical Power of Attorney
In addition to preparing a Will, Jane and Robert should each sign both a Financial and a Medical Power of Attorney giving decision making power to the other spouse and naming someone they choose to serve as a back-up in case their spouse is not able to help them. The Financial Power of Attorney designates a person called the "attorney-in-fact" to make a wide range of financial decisions such as writing and depositing checks, making investment choices, managing a business, and buying or selling real estate.

In Robert's and Jane's situation, designating each other as the Financial Power of Attorney is fitting since it is likely that they are already co-owners of bank and stock brokerage accounts. In case the spouse is not able to serve as attorney-in-fact, they should each also name a successor to their spouse such as a sister, brother, adult child, or friend. They can also name a professional company such as a bank trust company or a licensed guardianship service.

For the Medical Power of Attorney, Jane and Robert will probably want to choose each other as their attorney-in-fact to make medical decisions if they become disabled. The spouse can then make personal health care decisions such as talking to medical providers and making treatment decisions if the ill spouse is unable to make those decisions. Since Robert has children from an earlier marriage, those children might be influenced by Robert's former wife, so it would be a good idea for him to specify that Jane alone could make medical decisions for him. Just as Robert and Jane need to name a back-up person for the Financial Power of Attorney, they should do so for the Medical Power of Attorney. If they do not have a second person to name, they can choose a licensed guardianship service to perform this task.

Funeral and Burial Arrangements
Finally, Jane and Robert should complete a form that deals with funeral and burial arrangements called a Dispositon of Remains Instructions. Jane and Robert may want to make it clear that the other spouse alone can make the burial and funeral arrangements post-death. Such decisions are very difficult, which is why it is important to have clear guidelines for what each person wants upon his/her passing. Like the Financial and Medical Power of Attorney, Jane and Robert may consider that their children may be influenced by other family members when making decisions regarding the funeral and burial arrangements. The hope is that both Jane and Robert will act in each other's best interests and carry out each other's wishes regarding the funeral and burial.

Conclusion
Being in a second marriage is wonderful, as you have the opportunity to experience a new love and life with someone that you value. Just keep in mind the potential financial strains and issues that may arise from an unexpected disability or death.

---

Contact me if you have specific questions or would like to schedule an appointment.

» What Estate Planning services do you provide?
» How do I get started with Estate Planning?
» Outline of an Estate Planning Seminar given by Mary Anne Vance, August 2013

Seattle, WA Estate & Trust Lawyers

Mary Anne Vance
Reed Longyear Malnati Corwin & Burnett
801 2nd Avenue, Suite 1415
Seattle, WA 98104
(206) 624-6271

»