Consider estate-planning implications

If you are getting remarried, you may face some special estate-planning challenges, especially if you have children from a prior marriage. The following 10 tips may help.

1. Talk with one another. Do not start off a marriage by hiding financial interests or concerns from one another. For instance, if you intend to pass assets directly to your children, let your fiancé(e) know. It is best to get these matters out in the open.

2. Protect your interests. When appropriate, you might have your fiancé(e) sign a prenuptial agreement. Essentially, this safeguards some of your personal assets in the event of a marital dissolution. Prenups no longer have the same stigma they once had in the past.

3. Learn from history. If you were divorced or had an unhappy first marriage, determine “what went wrong.”  Try to avoid making the same sort of mistakes this time around. Of course, you may face certain legal or contractual restrictions, so take that into account.

4. Do an inventory. Figure out what you own and what those assets are worth. This includes investments such as stocks, bonds, mutual funds and real estate, as well as IRA and qualified retirement plan amounts. Do not forget about life insurance policies.

5. Divide and share. Decide whether and how much you want to commingle assets. Remember, state laws can have an impact. For instance, if you reside in a community property state, joint ownership is presumed by law, while other states are guided by equitable distribution principles.

6. Honor the titles. The way property is titled is more than window dressing. For instance, if you and your spouse own property as joint tenants with rights of survivorship (JTWROS), it will pass directly to your spouse. But if you own assets as a sole owner, they will generally be distributed according to your will.

7. Revise your will. Speaking of your will, it will likely need to be updated, at the very least, or replaced by a new one. Be clear about your beneficiary designations. Note: Designations previously made for IRAs, qualified plans and insurance policies will supersede your will if not changed.

8. Take taxes into account. Typically, your estate plan and accompanying documents can maximize tax provisions, such as the unlimited marital deduction and estate-tax exemption ($5.49 million in 2017). Note that the exemption is “portable” between spousal estates.

9. Establish a trust. In conjunction with updating your will, you may set up one or more trusts. Not only can a trust provide tax advantages but it may also effectively allow you to limit access to assets that will be passed to your heirs. There are numerous variations, so explore the options.

10. Rely on professional advisers. Fortunately, you do not have to go it alone. Set up an estate-planning “team” for this purpose.

 

Although every situation differs, a team will typically consist of a CPA, an attorney and a financial planner. Contact your JMF professionals who can provide the expertise you need.