estate planning: taking care of the surviving spouse during their lifetime and then leaving whatever assets remain to your children. Now, not only do you have to take into consideration the needs of your new spouse, you also have to consider the needs of your children from your previous marriage and possibly the needs of children from your second marriage.
In Oregon, when a person becomes married, his or her existing will is
automatically revoked. So, even if you updated your estate planning
documents after your divorce, a remarriage may require you to take a
second look at your existing estate plan.
- Beneficiary Designations. Certain assets let you
name a beneficiary and are not controlled by a will or trust. These
assets include life insurance policies, employer retirement plans, IRAs,
annuities, and certain investment and bank accounts. You most likely
named your spouse as beneficiary when you were married. Given the fact
that you have remarried and may have additional children, updating your
beneficiary designations is critical: beneficiary designations will
override a will or trust if the documentation isn’t consistent. What
does this mean? It means your ex-spouse will receive the assets if he or
she is still named as the beneficiary!
- Qualified Terminable Interest Property (QTIP) Trust.
A QTIP Trust is a type of trust that can provide for your new spouse
until his or her death or remarriage, with the remainder of the assets
passing to the beneficiaries of the trust – usually your children
(though you can name anyone). The surviving spouse is entitled to the
income produced by the trust during their lifetime, but the surviving
spouse does not have full ownership of the trust assets and cannot sell
them or give them away. In addition, these are special IRS-favored
trusts that have special estate tax implications. The benefit of a QTIP
trust for a second marriage is that it provides for flexibility in
treating beneficiaries, can save assets for children of a previous
marriage, and can generate tax savings and deferrals of estate tax in
- Irrevocable Life Insurance Trust (ILIT) . An ILIT
is an irrevocable trust that is both the owner and beneficiary of one
or more life insurance contracts. An ILIT could be a way to prevent
conflict in your blended family because it would provide for an
immediate death benefit to whomever you designate as beneficiaries (most
likely your children from your first marriage), instead of forcing
children to wait for your spouse to die before having access to assets
(as is the case with a QTIP trust). Then, the remainder of your assets
would be available to your spouse and perhaps children from your second
marriage. As an added bonus, because the insurance proceeds are not part
of your estate for estate tax purposes, an ILIT is a useful tool to
avoid state and federal estate taxes.
- Power of Attorney and Health Care Directive. Now that you are remarried, you want to make sure that you have designated the proper person to make financial and health care decisions for you in the event you become incapacitated. In many cases this will be your new spouse. In Oregon, divorce does not automatically revoke a power of attorney, so failure to update your estate planning documents could cause your ex-spouse to serve as your agent.
Call us at 503-227-1515 or request a consultation online.