Creating an estate plan requires that you and your attorney consider numerous uncomfortable possibilities. One of those is the fact that your spouse may someday remarry.
A recent Forbes’ article asks “What Happens If You Pass Away And Your Spouse Remarries?” The article acknowledges that the thought may not make you feel super, but you should consider the possible financial consequences, especially your children’s welfare. If most of your estate is set to pass to your spouse and he or she remarries, those assets may no longer pass (either in whole or in part) to your children—whether from that marriage or a previous one. There’s the potential that if your spouse dies first, the assets you passed to her, could fall not only under her control—but also under that of the new spouse.
A Family Wealth Trust can stipulate that when you die, your assets are to be put in a separate irrevocable sub-trust. Your children are named as the beneficiaries of the trust, and your spouse is named as the trustee of this trust. Your spouse can use or benefit from the property held in that trust. However, he or she doesn’t own those assets or the sub-trust itself. The ownership of the property in the Trust is reserved for your children. A Family Wealth Trust also will contain a special condition that in the event your spouse remarries without signing a prenuptial agreement, he or she loses the ability to access the property held in the sub-trust. This guarantees that your children retain ownership of the assets you intended for them to receive and it is not part of a divorce settlement.
These trusts also qualify for the marital deduction in your gross estate. Therefore, any assets above the applicable exclusion can go into the trust. This move lets you avoid estate taxes, if you own considerable assets.
Finally, a Family Wealth Trust lets you and your spouse decide now what your children will receive, if one of you pass away. It eliminates a much more difficult scenario, if a new spouse and possibly stepchildren enter the picture after you pass.
Reference: Forbes (June 28, 2017) “What Happens If You Pass Away And Your Spouse Remarries?”