The modern family of today is often a mix of spouses, exes, kids, and steps who somehow find a way to make it all work. Estate planning for such an intricate blended family may be a little tricky, and there are lots of factors to consider.
While traditional estate planning documents are critical, it is also important to consider a prenuptial or a cohabitation agreement. Either one of these agreements should spell out, in as much detail as possible, what will occur if the relationship dissolves, regardless of whether or not the couple is married.
One of the major issues that this agreement should address is housing. When a couple purchases or rents a home together, if the relationship falls apart, and both parties are liable on a mortgage, what will happen?
Additional life insurance may be necessary if one of the parties is under an order of the court from a prior divorce decree wherein a percentage of assets is required to be maintained for the benefit of children from the prior marriage.
It is also important to consider each party’s health proxy and durable power of attorney. Who will be in charge of making decisions in the unfortunate event that one individual becomes incapacitated?
A will and possibly a trust should also be considered, and provisions within these documents should fairly closely mirror the prenuptial agreement to conform with all of the requirements set forth in that agreement, which may be construed to be a legal contract.
In addition, if there are any requirements under an order of the court from a prior divorce decree, those provisions should also be reviewed and included within one’s will.
When assets of relatively equal value are owned, some couples choose to retain their own assets in the event of a divorce, however, in the event of a death, some additional assets would be left to the survivor. Other options may include a possible phasing in of assets.
Health insurance should also be considered prior to marriage. Both parties may be receiving health insurance from a former spouse. The previous divorce decree, any modifications, and separation agreement should be reviewed carefully ensure that all benefits are maintained or solutions may be implemented.
The issue of life insurance and qualified plans such as 401(k)s, IRAs, 403(b)s, etc. should also be reviewed. It is very important to understand that such assets pass by beneficiary, not by will. Therefore, whoever is named as the beneficiary of these assets will receive them without the need of having those assets pass through probate.
Likewise, if assets are intended to pass to a trust or to individuals listed in a will, it is important to obtain change of beneficiary forms and have them signed and forwarded to the plan administrators at insurance companies when the documents are signed.
The bottom line is that there are many important considerations and decisions to make before remarrying or moving in with another person.
About Hyman Darling, Trust & Estate Attorney, Springfield, Massachusetts
Hyman Darling is a shareholder in the Springfield, Massachusets law firm of Bacon Wilson, P.C., where he is Chairman of the Estate Planning, Elder Law Department. Attorney Darling is recognized as the area's preeminent estate planner. His areas of expertise include all areas of estate planning, probate and elder law. Additional specialties include: Adoption and Real Estate. You may contact him at (413) 781-0560.