Our New York estate planning attorneys frequently remind residents that it is important to update an estate plan following major life changes, such as a divorce or marriage. However, that basic advice may be misleading, because in some cases it is crucial to consider updating the plan before the major life event takes place. That may be especially true in the case of second marriages.
A recent Elder Law Answers article summarized a few points to consider at this time:
-Make sure both spouses are on equal footing. Secrecy at this time is toxic. Both partners should take an inventory and understand what assets and debts are on the table. All planning extends from that base.
-Basic finances roles should be decided. Is one spouse selling a house and moving in with the other? Will debts be combined? There may not be a single right answer, but the decision should be clear so that neither side is surprised.
-Makes inheritance plans. This is one of the most confusing areas and a place where New York estate planning attorneys can be of great service. Blended families often require more complex legal work to ensure the "who gets what" decisions have legal backing. Creating trusts and structuring asset ownership is critical at these times, as the "default rules" about inheritance are unlikely to match with the exact wishes of a couple in a second marriage, particularly if children are involved.
-Consider a prenuptial agreement. While these contracts are often spurned by about-to-be-married partners, it is simply wise to consider whether a legal agreement before the marriage is a necessary precaution. This is not just for each partner but also the families. Agreeing to various issues ahead-of-time can spare each family stress and disagreement down the line. A prenuptial agreement does not mean that the partners do not think that the relationship won't last. It is simply prudent action by each spouse.
-Determine if beneficiary designations need to be changed. Retirement plans, annuities, and insurance policies all include designations of beneficiaries. However, divorced partners should consider that their divorce decree may not allow them to simply change a designation if the assets were factored into the divorce settlement.
-Consider if more protection is needed. Depending on the answers to these issues, it may be prudent for a couple to consider buying more insurance to protect each spouse For example, if a divorced partner cannot change a beneficiary designation without violating a divorce decree, then perhaps it is prudent to buy additional life insurance. Similarly, it may be wise to purchase long-term care insurance, if affordable. It is unfortunate for wealth accumulated over a lifetime to be drained on the care of a new spouse. If long-term care protection is feasible, it is wise to take advantage.
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