Estate Planning in a Second Marriage: Providing for a Spouse and Children
A second marriage brings people, property, and plans together in new ways. It can also raise a difficult estate planning question: If you die first, how can you provide for your spouse while preserving an inheritance for your children?
Asking that question does not mean you distrust anyone. It means both goals matter.
Begin by defining those goals. Does your spouse need income, a place to live, access to principal, or all three? Should your children receive something at your death, or only after your spouse dies? Do you intend them to receive a specific amount, a percentage, particular property, or whatever remains?
Those are different promises, and they require different planning.
An Outright Gift to a Spouse May Not Protect the Children’s Inheritance
A common plan is to leave everything to a spouse with the expectation that the spouse will later leave the remaining property to the children. That may happen, but it is not necessarily guaranteed.
When assets pass outright to a surviving spouse—under a will or trust, through joint ownership, or by beneficiary designation—the spouse generally controls them. Unless a binding agreement or other restriction applies, the spouse may spend the assets, give them away, or name different beneficiaries.
That does not require bad intent. The surviving spouse may need long-term care, remarry, help another family member, or experience a financial setback. Reciprocal or “matching” wills also do not ordinarily make the spouses’ plans irrevocable merely because they contain similar terms.
Suppose $800,000 is intended to support a spouse and eventually provide $400,000 to two children. If the same funds must support the spouse for 25 years, there may not be $400,000 left.
The plan should therefore identify whether the children are to receive a defined inheritance or only the property remaining after the spouse’s needs have been met.
A Trust Can Balance the Two Goals
A trust may provide income or principal for a surviving spouse during life and direct the remaining property to children after the spouse’s death.
The trust should address:
what the spouse may receive;
when principal may be used;
who will make distribution decisions;
whether the spouse may change the ultimate beneficiaries; and
who will receive the remaining property.
A trust does not necessarily guarantee that a particular amount will remain for the children. If principal may be used for the spouse’s support, the eventual inheritance may be reduced by the spouse’s needs, taxes, expenses, and investment performance.
Some families provide separate funding for the children, such as life insurance or assets distributed at the first spouse’s death. Others make all trust property available for the spouse’s permitted needs and give the children whatever remains. Neither approach is automatically better. The resources must match the intended promises.
Whether spouses use a joint trust or separate trusts, the documents should specify what becomes irrevocable at the first death and whether the surviving spouse has any power to redirect the remaining property.
The Home Needs Clear Instructions
The family home often presents the most sensitive issues.
A surviving spouse may worry about being required to move. Children may wonder whether they will have to pay expenses on a property they cannot use—or whether they will ever receive it.
If the spouse may remain in a home intended eventually for the children, the plan should answer practical questions:
Who pays the mortgage, property taxes, insurance, and repairs?
What happens if the spouse wants to move or needs residential care?
May the property be sold and a replacement home purchased?
What happens to the sale proceeds?
When does the right to live in the home end?
An instruction stating only that “my spouse may live there” does not explain who must pay for a major repair or what happens if the home no longer meets the spouse’s needs.
Missouri and Illinois each provide legal protections and statutory rights for surviving spouses, although the rules differ. The outcome may also depend on how the home is titled, whether it is held in trust, whether a marital agreement applies, and which state’s law governs.
Choose the Trustee Carefully
When a trust supports a spouse during life and distributes the remainder to children, the beneficiaries have different interests in the same property.
A child serving as trustee may have to decide whether to approve a distribution to a stepparent, knowing that the distribution could reduce the child’s future inheritance. The surviving spouse may also feel uncomfortable asking a stepchild for money.
A trustee should be able to act impartially, follow the trust terms, keep records, and communicate with the beneficiaries. An independent trustee or co-trustee may reduce personal strain, although professional fees and administrative complexity should also be considered.
Coordinate Beneficiary Designations and Property Ownership
A will or trust does not necessarily control every asset. Retirement accounts, life insurance, payable-on-death accounts, transfer-on-death accounts, and jointly owned property may pass under their own beneficiary designations or ownership terms.
Many employer-sponsored retirement plans provide special rights to a participant’s spouse and may require the spouse’s written consent to name another beneficiary. Different rules may apply to IRAs and other plans.
The estate plan should be coordinated with:
retirement and investment accounts;
life insurance;
real estate ownership;
business interests;
divorce judgments or settlement agreements; and
premarital or postmarital agreements.
Changing a beneficiary designation without reviewing the governing plan documents, contractual obligations, and tax consequences can create an unintended result.
Communication and Regular Reviews Can Help
Clear documents are essential, but communication may also reduce future conflict. You do not have to disclose every dollar. It may be enough to explain that the plan considers both the spouse’s security and the children’s inheritance.
The plan should also be reviewed after a marriage, divorce, move to another state, retirement, substantial change in assets, or change in a spouse’s health or support needs. Wills, trusts, property titles, insurance, and beneficiary designations should continue to work together.
A Useful Starting Point
Before an estate planning meeting, complete these two statements:
“I want my spouse to have . . .”
“I want my children or other beneficiaries to receive . . .”
Be specific about housing, income, access to principal, timing, and anything that should be reserved for a particular beneficiary. Bring existing estate planning documents and current account and beneficiary information to the meeting.
Schroer Legacy Law LLC assists clients with estate planning matters in Missouri and Illinois. To learn more about the firm’s estate planning process, schedule a complimentary 15-minute introductory call:
This article is provided by Schroer Legacy Law LLC for general educational and informational purposes only. It is not legal advice and does not create an attorney-client relationship. An attorney-client relationship is formed only through a written engagement agreement signed by the firm and the client.
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