As the famous Cher song goes “Do you believe in life after love?” For many Americans, the answer to this question is yes. Many people who divorce from their first spouses, often seek a second or third marriage. Parents who plan on remarrying are often concerned about how the new marriage will affect their children’s inheritance. Many parents do not realize that their marriage to a new partner may impact the inheritance of children from their previous relationship. For this reason, it is important that parents who are planning on remarrying create or update an existing estate plan that reflects their wishes and protects their children’s interests.
Remarriage may affect how assets are passed to beneficiaries. In New York State, a spouse cannot be completely disinherited from an estate as they are entitled to an elective share. Regardless of whether or not the deceased left behind a Last Will and Testament that bequeaths assets to other individuals, a spouse may claim their elective share. Under New York State law, if the deceased’s assets consist of $50,000 or less (not including life insurance), the surviving spouse is entitled to the entire estate. If the deceased’s assets consist of more than $50,000 (not including life insurance), the surviving spouse is entitled to the first $50,000 or 1/3 of the estate’s assets, depending on which is more. The spouse is also entitled to $25,000 cash or cash equivalents, including bank account and CDs, as well as the deceased’s car (up to a value of $25,000). If the value of the car is greater than $25,000 than the spouse may pay the difference to the estate.
The deceased’s children will inherit the remainder of the estate, divided equally amongst each of his or her children. If the deceased died intestate, no assets will be passed to stepchildren or foster children, unless legally adopted, as well as nonprofit entities or charities. Unless the spouse dictates in writing that they are giving up their right to an elective share, he or she may file a Notice of Election to claim the amount owed. A surviving spouse may file for an elective share within six months of the appointment of a representative of the estate or two years after the testator passed away.
According to Forbes, a way to protect a child’s inheritance is to give it to them directly. This can be done by giving them a direct gift through a Last Will and Testament. A Will can outline an individual’s intended beneficiaries, identify what assets they own, and how to specify how those assets will be distributed after he or she passes away. In addition to outlining how much of his or her resources will be passed to each child, the individual can also specify financial designations to charities, non-profits, non-immediate family members, and friends.
Another means of achieving this is by making the child a beneficiary or partial beneficiary of assets that are not governed by a Will. This may include IRAs, 401(k)s, or insurance policies. For a 401(k), the account holder must have his or her new spouse sign a spousal waiver to let another person be named as a beneficiary. For IRAs, the account holder is entitled to name who they want as the beneficiary without a spouse’s consent. If an insurance policy holder wants to change the beneficiary designation from a spouse to a child, they may do so at any time as long as the beneficiary is not irrevocable. If the beneficiary is irrevocable, they will need the beneficiary’s written consent to make the change.
Another way a parent can protect their child’s inheritance is to establish a trust. An individual can set aside resources and assets to be used by their spouse during their lifetime and then, upon the spouse’s death, the remainder of the trust will be passed to his or her children. A trust can also be established in a way to provide the overall amount of the trust to a spouse who can take out money for certain purposes or to distribute a set amount annually. Since the resources are protected in a trust instead of given outright, an individual can have a say in how the ultimate distribution of the assets will be made. If a parent has assets that he or she does not want to pass directly to a spouse, he or she may want to consider drafting a prenuptial or marital property agreement. This legal document can outline what assets are considered shared marital property or not and discloses how those assets may or may not be distributed upon their death or dissolution of marriage.
A properly executed estate plan including a Will, trust, joint ownership and beneficiary designations is essential to ensuring that assets pass according to the wishes of the deceased. If you are considering remarriage or have remarried already, it is important to create an estate plan or update an existing one to identify your assets, designate beneficiaries and joint owners and also specify how you want your assets to be passed to your spouse and children both natural and step. The Long Island estate planning lawyers at Tully Law, PC are available to further explain the steps of the estate planning process and will help you put a plan in place that reflects your wishes and protects your assets. For more information or to schedule a consultation, contact our Long Island estate planning law offices at (631) 424-2800.