Although weddings are meant to be a time of love, laughter, and celebration, they are also one of the biggest threats to your wealth. Marriage and remarriage can have some serious financial consequences. Consider the following examples:
Bob and Susan always dreamed of passing their wealth down to their two children. Bob passes away and a few years later, Susan marries John. Because of improper planning and failing to obtain professional legal assistance, Susan titles all of her assets (including what Bob left to her) jointly with John. Susan suffers a stroke and dies a few weeks later. Where do the assets end up? They all pass to John, who’s will eventually leave them to his own children. Bob and Susan’s children are effectively disinherited.
Rights of a Surviving Spouse
Change the above scenario slightly. Let’s assume instead that Susan did not title everything jointly with John and had executed a will leaving everything to Bob and Susan’s children. The problem? Under North Carolina law, as a spouse, John can claim a minimum amount from Susan’s estate, even if Susan’s will disinherited him. Under North Carolina law, John's share could be as much as 50% of the estate.
Children from Prior Marriages
Jeff and Sandy met and married in their 50s. They both have children from prior marriages. During the marriage, they save, invest wisely and their estate grows. They always intended that their wealth be split between both of their sets of children. Sandy passes first, leaving everything to Jeff. Jeff’s estate plan, which had not been updated in years, leaves everything to his own children. Sandy’s children are effectively disinherited. Or, maybe the two of you updated your planning together, so that after your both gone the estate is supposed to be divided between your children and your spouse's children. Well, if you leave everything outright to your spouse, then your spouse can also still update his or her will after you're gone. We've seen it happen time and time again--eventually the surviving spouse and your children will grow apart (or maybe they never even got along that well to begin with), and at some point, your surviving spouse may eventually decide that your children don't need or deserve it so your surviving spouse will update his or her estate plan to leave everything only to their own children and your children wind up disinherited.
Big Spender Spouse
A frugal person can have his or her wealth squandered by a new spouse who is a big spender. This could apply to both your surviving spouse and your children.
Gary and Jane met in their 60's and fell in love. Gary has saved and invested well over the years and intends to pay college tuition for his grandchildren and leave both his children and grandchildren with a nice inheritance. Jane, on the other hand, has struggled financially for years, living paycheck to paycheck. Gary’s children are concerned. How will Gary protect his financial stability after he and Jane get married? What if Jane ultimately needs long-term care or nursing home care? Would Gary wind up spending down his savings for Jane’s care?
Common Ways that Children Get Disinherited
- No prenuptial agreement in a remarriage. With marriage comes certain rights to the estate, unless they are waived in a properly executed prenuptial agreement.
- Putting assets in joint names with a new spouse. When you die, they will pass outright to your surviving spouse and from there, all bets are off—your surviving spouse could get remarried, have more children, spend all of the money, etc.
- Naming the spouse as the beneficiary on life insurance policies, retirement accounts, and annuities. Again, when you die, they will pass outright to your surviving spouse and from there, all bets are off.
What Should You Do?
To avoid accidentally disinherited your children:
- Obtain a premarital agreement before getting remarried (or consider a post-nuptial agreement if you’ve already gotten remarried).
- Keep your assets separate after marriage.
- Work with an estate planning attorney that can help you navigate these issues carefully—there are ways to structure your estate so that funds are set aside to care for your spouse, but also ensure that anything remaining must pass on to your children.
- Carefully review all titling of your accounts and beneficiary designations with your estate planning attorney.
Want to Learn About Other Common Estate Planning Mistakes?
To learn more about common estate planning issues, check out our free guide, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family's Future, or to discuss your estate planning concerns, please call our office at 919-443-3035 or use our contact form.
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