Second marriages can raise numerous financial concerns especially if there are children from the first marriage. If you are the one getting remarried, there are tools you can use to protect your assets for yourself and your kids. However, it’s also essential to keep your ex-spouse from disinheriting your children when remarrying. In the latter case, you can include provisions in your divorce settlement agreement as well as utilize estate planning techniques to preserve wealth for your children.
How Could Your Former Spouse Disinherit Your Children?
It is common for many couples to have a basic will that provides that if one spouse dies, the other gets everything. That may be fine if the spouses are also the parents of all of the children because the surviving spouse will likely leave the couple’s wealth to their children. However, in a second marriage, one or both spouses may have children from the prior marriage and also have some together. If that is the case, the surviving spouse could choose to leave all assets to his or her own children or other family members, effectively disinheriting your children.
In addition, even if a spouse leaves money to his or her children, in some states, the surviving spouse may be entitled to an ‘elective share’ of the estate. That means that the surviving spouse can inherit a specific percentage of the deceased’s estate even if the will provides otherwise. The elective share could significantly decrease what the deceased’s children would have inherited.
Can You Protect Your Children’s Right to Inherit in Your Divorce Settlement Agreement?
The parties to a divorce have significant flexibility to craft a settlement agreement that meets their needs. For example, the agreement can require the spouses to create a will or trust that leaves an inheritance to their children. A parent may also be compelled to purchase life insurance and designate the children or a trust for the children as beneficiaries.
Another option is to use a Qualified Personal Residence Trust (QPRT). This is a type of irrevocable trust wherein the grantor (parent) puts the home into a trust but retains an interest in the home for a specified period of time. Once the period is over, the remainder of the interest is transferred to the beneficiaries. In the context of a divorce, this would allow the grantor’s parent to remain in the home for the term. After the expiration of the term, the parent could pay rent to continue to stay there or sell the home. Either way, the proceeds would go to the children as beneficiaries.
Both parents can also agree to set aside money for their children in an irrevocable trust. Those funds could be used for any specified purpose, such as educational costs, starting a business, buying a house, etc.
The benefit of these techniques is that they focus on providing wealth to the children. Many divorcing couples will argue vigorously over how to divide assets among themselves. However, they are more likely to agree to give money to their children.
What Is the Best Way to Protect Assets for Your Children?
There is no one size fits all solution to preserving wealth. As a result, it’s critical to work with experienced matrimonial and estate planning attorneys to determine the best option for your situation. These tactics and others can have significant tax and estate planning ramifications. Skilled attorneys can advise you on what choices to make and how to implement your plan effectively.
Our attorneys have extensive experience helping families ensure their wealth is passed on. Contact us for a consultation or advice on disinheriting your children.