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Estate Planning After Remarriage

There are triggering events which make estate planning, or editing an estate plan, necessary in Oregon. Remarriage is one of these triggers. This is especially true if your new marriage includes children from previous marriages, stepchildren, and additional children from your current marriage.

Even in the most well-adjusted blended families, death challenges relationships. This makes a clear estate plan vital if you want to provide for family members while also reducing conflict. You must also avoid making the same estate planning assumptions that are appropriate in first marriages but are likely to backfire in subsequent ones. Here are four unique considerations when creating an estate plan after remarriage.

Conflicts of Interest

The natural inclination is to leave everything to your spouse and for your spouse to do the same. This is a safe avenue in first marriages when children only come from that marriage.

Remarriage changes that dynamic. If you pass all your property and money to your current spouse, understand that they have no obligation to consider your children from a previous marriage. Your death may create distance between them and if your current spouse outlives you considerably, he or she will be more likely to account for his or her own children and any new spouse. They are not likely to pass property to your children, especially if they have not spoken to each other for years.

One solution is to place your property in trust to provide income to your current spouse. Once your spouse passes away, remaining property is distributed to your children. You may include children from both your previous and current marriages and any stepchildren in that distribution.

If you decide to take this approach, appoint an uninterested third party to serve as trustee. Otherwise, there is a strong possibility of a conflict of interest based on self-interest.

If you appoint your spouse as the trustee, they may choose to invest your assets in low-yield options that leave nothing for your children once your spouse passes away. Likewise, your children may choose more long-term approaches that leave your current spouse inadequate income. An independent trustee is more likely to manage assets to everyone’s advantage.

Beneficiary Designations

Sometimes, the best approach to provide for children is with non-probate assets. Making them beneficiaries on your life insurance, retirement, and investment accounts is an excellent way of ensuring they receive something after your death. You are then safe to pass property and money to your spouse through your will.

This strategy is easier and less expensive than a trust but it requires attention to detail. Check the beneficiary designations on these assets and change them now. Most importantly, let your family know you made these changes and why. You do not want your spouse to expect a life insurance payout only to find out after your death that they are no longer entitled to those funds.

Agent Appointments

Your estate plan will likely include an advance directive and a durable power of attorney. These cover decision-making should you become incapacitated. The advance directive appoints a health care representative who makes health care decisions on your behalf. A power of attorney appoints an agent who manages your financial and business affairs if you are unable to do so.  A power of attorney dies when you do.

Spouses are often the first choice for these appointments. In blended families, this may not be the best idea. Hurt feelings and conflict can arise if your children from a previous marriage do not feel your spouse is acting in your best interest or puts his or her self-interest above your needs.

You are better off choosing family members who are suited to these tasks rather than focus on relationship status. For example, you may discuss end-of-life decisions more frequently with an adult child rather than your spouse. Your child may listen better while your spouse shuts down when you bring up the topic. Or you may run a small business with a daughter, who is likely a better candidate to be your power of attorney.

The important part is, you want to appoint individuals to get along well with all family members, including your spouse. If there is so much tension that this is impossible, consider appointing someone outside your immediate blended family, like a close friend or sibling.

Dangers of Intestacy (when you don’t have a Will)

It may be tempting to do nothing and let intestate statutes take control. This may seem to prevent difficult discussions but it will only lead to many, many problems for your loved ones after you pass away.

Intestate succession only considers blood relatives. It will ensure support for spouses, children, parents, and even siblings. But if you are close to your stepchildren and want them to inherit assets or take over a small business, intestate succession will not allow that. Your stepchildren may also have special needs that you want to be provided for if you pass away. Again, intestate succession will not even take them in account, even if you had a close relationship. This only changes if you adopted them, which often does not occur if you remarry their parent when they are adults.

Blended families offer distinct estate planning challenges, but they are not surmountable. Find solutions by discussing them with an Oregon estate planning attorney. Call Gruber & Associates today to schedule a consultation.

Three No-Power-of-Attorney Horror Stories

When you visit the office of Gruber & Associates, P.C. for your estate planning appointment, we frequently suggest other documents in addition to your will or trust. One of these includes a durable power of attorney. This document appoints an agent to handle your financial or business affairs if you are incapacitated or unavailable. It becomes invalid when you die.

This is a fairly simple document that does not add much to your estate planning expenses. When you need it, it is often a dire situation which makes this an essential part of long-term care and planning. If you do not have a power of attorney when you need one, it can make things difficult for you and your family members. Here are three possible horror scenarios if you do not have a valid power of attorney.

Unmanaged Insurance Claims

A power of attorney may go into effect immediately or if you become incapacitated. Since incapacitation often leads to filing a disability insurance claim, you may need an agent to handle that process for you.

However, an insurance company is not going to let just anyone file the forms, grant permission to access your medical records or make decisions during claim processing. Your spouse is not automatically granted this privilege since the law sees married people as unique individuals, not one unit. The only way for your spouse, sibling, business associate or good friend to help you through this process is with a power of attorney. When you appoint any of these people as an agent, they only need to provide the claims adjuster with the power of attorney and that grants them the authority to manage your claim.

Otherwise, appointing an agent to act on your behalf becomes expensive and complex. You will secure disability benefits quicker if you prepare just in case of incapacitation.

Limited Access to Assets

If you do not have a joint checking account with your spouse or you have business assets that are only in your name, your family will not have access to these income sources if you are incapacitated in a hospital bed. The only way your separate assets can be used for your benefit is if you execute a power of attorney.

This can be especially necessary if your incapacitation is for the long-term or you face an uncertain prognosis. The power of attorney may grant permission to a business partner to transfer income to your family or allow your spouse to access a business account.

This not only provides income but assures other functions are carried out too–like paying bills, filling out automatic deposit forms, and managing investments. If you are single, it is unlikely you have a joint owner on your accounts. Unless you want to return from incapacitation with a defaulted mortgage and past-due bills, you want to appoint someone to manage these affairs in case you are unable to do so yourself.

Poor Asset Management

Sometimes, it is a matter of finding the best person for the job. Powers of attorney also apply if you are leaving the country for a while and need someone to manage your property in the United States. Sometimes, that can end with a bad surprise when you return home.

For example, you may allow a spendthrift relative to stay in your home while you decide to live in Italy for the next five years. It may be difficult to trust this relative to pay the mortgage on time or keep utility bills current.

However, with a power of attorney, you can appoint a responsible manager for your home and its expenses. This individual can pay the mortgage and utilities from your account, and demand reimbursement each month from your temporary resident. If they fail to pay, your agent can start eviction procedures on your behalf by hiring an attorney and making decisions throughout the case. Your interests are protected better if you go this route rather than rely on someone who may not follow through.

There are also instances where clients trust their oldest child more than their spouse to make investment and financial decisions. Single people who live estranged from their families may desire that their live-in partner or best friend handle assets in case of absence or incapacitation. Just because an individual is a joint owner or physically present does not necessarily mean your best interests motivate them. You take better control of your situation with a power of attorney.

So when we recommend a power of attorney at your estate planning appointment, do not scoff. Perhaps the circumstances requiring one will never arise. But if they do, you want to make everything as easy as possible for you and your family. Plan for contingencies and make an appointment with Gruber & Associates today to create a solid estate plan.