Second marriages present some interesting estate planning issues. Hindson & Melton LLC recommends that individuals contemplating a second (or subsequent) marriage seek legal advice prior to the marriage.
Second marriage estate planning considers issues such as:
- what, if any, assets to own jointly and when
- how to title jointly owned assets
- whether and when to have joint debt
- whether a prenuptial agreement is needed
- whether to purchase a home together and the financial mechanics of this
- how to provide for the spouse in the event of death
- how to care for the spouse in the event of disability
- business succession and ownership
- the likelihood that relationships with family members will change over time
- use of beneficiary designation opportunities
- estate tax planning strategies
Incorrect assumptions lead to unintended consequences.
The couple needs to understand the legal implications of their decisions based on the law of the state where they are domiciled. Often, there are inaccurate or vague assumptions about the legal effects of the couple’s actions, leading to unintended consequences. The misinformation may be based on the law of another state, or simply wrong. This phenomenon is frighteningly common in the estate planning and financial arena.
Right motives do not guarantee a good outcome.
Sometimes there are practical problems created by the best of intentions – such as giving your spouse the right to reside indefinitely in a home intended to be part of your children’s inheritance. This is almost always a recipe for disaster. Creative planning can offer solutions.
Differing expectations of the marriage are common.
The couple’s conversations resulting from good premarital counsel frequently reveal differing expectations of the marriage which have been largely unspoken. In the case of a serious conflict, it is preferable to discover it prior to the marriage.
The couple’s adult children may feel threatened by the marriage, and having a road map for the couple’s legal and financial dealings can ease tension or uncertainty.
Planning for disability or incapacity.
If the couple stays married long enough, at some point one or both is likely to become mentally or physically incapacitated. Wise planning for this eventuality is essential to a good outcome.
Should you “vette” your mate?
To what extent should you make inquiry about your soon-to-be spouse? Should he or she be “vetted” before tying the knot? I have heard (and perhaps said) that you should get a credit report, a criminal background check, and a medical check before marriage. While none of these issues necessarily doom the relationship, ideally you should go into the marriage knowing most, if not all, important factual background, health, financial, and legal information about your mate. Ideally this comes from mutual self-disclosure. Individuals with considerable wealth occasionally engage consultants to conduct a thorough background investigation. While there is nothing romantic about a premarital medical examination or prenuptial agreement, in marriage an ounce of prevention really is worth a pound of cure.
South Carolina one-third “elective share” for surviving spouse.
A South Carolina domiciliary has another important issue to consider. Under South Carolina Code 1976 § 62-2-201, when a person domiciled in South Carolina dies, the surviving spouse has a right to take one-third of the deceased spouse’s probate estate – no matter what the will says and no matter how many children there are. This is known as an “elective share of surviving spouse.” If you intend to leave your entire estate to your children from a prior marriage, your newly acquired surviving spouse could thwart this plan by filing an elective share petition after your death.
The South Carolina elective share law says the surviving spouse is entitled to a third of the probate estate. What about property transferred at death by a will substitute such as a trust, pay-on-death designation, or jointly owned property? The code would seem to exclude such property from eligibility for calculating elective share. However, a 1991 South Carolina Supreme Court case found a revocable trust illusory because the settlor retained essentially the same rights in trust assets as he had before the trust was created. The Court included the trust assets in the estate for purposes of calculating the widow’s one-third elective share. The settlor had created the trust to leave most of his estate to his daughters from a former marriage, and his plan failed miserably.
Fortunately, there is a solution to this dilemma. South Carolina law provides for a voluntary waiver of the surviving spouse’s right to an elective share, but it requires fair and reasonable disclosure in writing to the waiving party of the other party’s property and financial obligations. Each party needs individual legal counsel. The waiver can take place before or after the marriage, and it can be a whole or partial waiver of the spouse’s right to elective share.
Identify and address your estate planning goals.
These are only a few examples of matters that can arise in second marriage estate planning. Whether you are contemplating a second marriage or have already remarried, Hindson & Melton LLC can assist you. We will work in partnership with you to identify and address your estate planning goals.
© Karen S. Hindson, Hindson & Melton LLC August 5, 2012