The Houston estate planning process can be complicated at any point during a person’s life. Generally, when relationships are altered—either in the case of a marriage or a divorce—changing the estate plan is not the first thought in a person’s mind. However, it is imperative to address the estate plan as soon as possible. Otherwise, the former partner could have legal rights if the individual becomes incapacitated or passes away before the divorce is finalized. For a lot people, this is not a pleasant thought.
Blended families are almost the new normal in America. A Pew Research Center analysis shows that as many as 40% of all new marriages include at least one person who had been married before. For another comparison, in 1960, 13% of all married adults had been married before, compared to 23% today.
In a blended family, one or both spouses have at least one child from a previous marriage or relationship. Financial and legal challenges are more complicated, as are the family dynamics between parents, step-parents, siblings and step-siblings.
CNBC’s recent article, “4 ways to help blended families navigate finances,” a staggering 63% of women who remarry come into blended families, with 50% of those involving stepchildren who live with the new couple, according to the National Center for Family & Marriage Research.
With about half of all marriages ending in divorce, second marriages and blended families have become the new normal in many communities. Estate planning for a blended family requires three-dimensional thinking for all concerned.
An article from The University Herald, “The Challenges and Complexities of Estate Planning for Blended Families, ” clarifies some of the major issues that blended families face. When creating or updating an estate plan, the parents need to set emotions aside and focus on their overall goals.
Estate plans should be reviewed and updated, whenever there’s a major life event, like a divorce, marriage or the birth or adoption of a child. If you don’t do this, it can lead to disastrous consequences after your death, like giving all your assets to an ex-spouse.
According to the National Center for Health Statistics and the U.S. Census Bureau, younger Americans are divorcing at much lower rates, while divorces for adults over 50 have just about doubled since the 1990s. Back in the 90s, for every 1,000 persons age 50 and older, only five divorced. In 2015, for every 1,000 married persons age 50 and older, 10 are divorced.
The issues of a gray divorce are very different than those of a younger couple, not to mention the financial and legal complexities of marriages that span decades.
Early adult life is simple. You may or may not have children, a car, a lease on an apartment. However, by the time you reach your 50s and 60s, you likely have some decent assets, like retirement accounts, investments, real estate and maybe even a few collectible cars. You’ll want a prenup, before you walk down the aisle again.
A prenup the first time you get married may seem overly protective, unless there’s a big economic difference between the couple. However, after a lifetime of work, building a business or a retirement portfolio, you want to be sure that a second marriage doesn’t create a financial calamity if it fails. A prenuptial agreement lets you go about enjoying your second marriage, says this recent article, “All About Prenups For Second Marriages,” from Forbes.
Here are some of the issue to consider in second (or third) marriages:
Saving loved ones from a large tax bill and maximizing the transfer of wealth across generations is great, but your estate plan needs to do more than that. The plan must consider the dynamics of your family, how they may treat each other after you pass and what can be done to protect them from each other.
CNBC’s recent article, “This threat could devour thousands of dollars from your estate,” notes that even families that look like they're perfect, are not. Perfection doesn't exist. When families fail to address these types of issues in their estate plans, it can create conflict between beneficiaries.
We Americans like to be married. So much so that, according to the U.S. Census Bureau, about a third of us have tied the knot at least twice. While the trend for younger adults is to delay getting married or not to marry at all, the number of Americans age 55 and up getting married again is on the rise.
The Flagstaff (AZ) Business News recently published an article, “Financial Issues to Consider in Remarriages,” which suggests that you should be candid about your financial situation. Couples who are marrying for the second (or third) time frequently have financial baggage. You should eliminate issues later in the marriage by having open and honest discussions about assets, debts and obligations. Think about the following questions to get the talks started:
Once the process of legally ending your marriage begins, you will need to make sure that your own interests are protected and that includes updating your estate plan to reflect this big life change. While some things may remain the same, like leaving your children certain assets, be assured that pretty much everything else will change, according to Forbes’ article, “The First Thing You Must Do When Your Divorce Is Final.”
Once your divorce is final, that is, the divorce decree has been approved by a judge, and a judgment rendered, contact your estate attorney and begin to review and revise the following legal and estate planning documents:
by Leonard M. Roth, Board Certified Family Law Specialist
Unfortunately, divorce is a life-changing event for married couples of all ages. My grandparents divorced after 65 years of marriage. There are critical factors to consider when divorce happens in your older years.
Texas is one of nine community property states. Property acquired from work during marriage is considered to be shared equally by both spouses. Marriage is a sharing event, and neither spouse has a greater right to the community property than the other spouse, until a court is asked to divide the community estate on divorce. In most marriages, there is a separate property estate that must be confirmed, but not divided, by the court, and a community property estate that must be divided by the court.
Once the initial emotional trauma is past and the couple starts working towards creating separation agreements, it's time to consider the day-to-day costs of living that change as the result of a divorce. The family economic unit that formerly had one mortgage or rent payment, one cable bill, one energy bill, etc., now has two of each of these bills. Wise planning for life after divorce includes living expenses, taxes and retirement planning.
Money's recent article, "Keep a Divorce From Killing Your Finances," offers several important tips for those going through or recently completing the divorce process.
Monitor assets in your divorce settlement: If you're in the midst of a divorce, examine the type of assets that you receive as part of your divorce property settlement. The reason for this is your cash flow. Even in cases where the math demonstrates an equal split between the two parties, one spouse could get stuck with a non-liquid asset, which might end up being difficult to liquidate if cash flow becomes a problem.