Forbes’ recent article entitled “Prenuptial Agreement: What Is A Prenup & How Do I Get One?” explains that a prenup contemplates the end of the marriage, so the couple can divide assets with an objective mindset. A pre-nup can even help protect a business.

Prenups allow you to determine if alimony will be due if the marriage ends, as well as the amount and terms of those payments. A pre-nup can also say what kind of bequests you leave to each other in your will. It can also be good for couples trying to keep separate significant pieces of personal property, including future inheritances and other anticipated income. This is common for couples with a significant age or wealth difference and among older or remarrying couples.

Prenups Aren’t Just for the Very Wealthy. Prenups can be a useful tool for almost everyone.

Protect Family Heirlooms. If you have a family heirloom and want to make sure that if your marriage ends, you’ll get to keep it, you can draft a prenuptial agreement that states the family heirloom is yours.

Pass Property to Children from Prior Marriages. A prenup can be used to establish property rights for second marriages. If you have children from a previous marriage, you can protect their interests in your assets and property.

Clarify Financial Rights. Prenups can help you decide now how assets will be split up instead of waiting until divorce proceedings. While divorce may never come, determining the financial distribution now saves time and headache.

Debt Protection. Prenups also provide debt protection. Some people enter a marriage with substantial financial debts, tax debts, or student loan debt. For couples in this situation, they can sign a prenup and clarify that those debts remain the separate responsibility of the spouse who incurred them, and thereby protect the income and assets of the other spouse.  They can also decide how debts incurred during the marriage will be handled.

Avoid Emotional Arguments. Divorce is emotional. It can be an overwhelming and upsetting process. When you’re negotiating with your spouse about assets, tempers can cloud your judgment about asset distribution. Contemplating these items with a clearer head is better for all.

In answering the question, “Do I need a Prenup?”, under Louisiana law, if you want a pre-nup after getting married (effectively a “post-nup”), you and your spouse have to petition the court in your parish of residence to have the community property regime dissolved judicially.  This can be an expensive process, and may not be used to avoid the unwanted debts that may have been already incurred.

Also, when answering the question, “Do I Need a Prenup?”, keep in mind that if you don’t have one, and one spouse has substantial “separate property”, the income produced by that separate property is community property.  This classification of the income from separate property as community property can include rents, interest, or other earnings from your separate property.  This can result in coomingling of your separate property with community property income over time.  In the event of a divorce, this can present a problem.  If you want to make sure that the income produced by your separate property remains separate, and you don’t have a pre-nup, you have to deliver to your spouse something called a “declaration of paraphernality”, and for it to be effective, you have to be able to prove that it was sent and delivered to your spouse.  Best to do this via certified mail.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “Do I Need a Prenup?” read also these additional articles: Can a 529 Plan Help with Estate Planning? and Can You Prevent Family Fights over Inheritance? and Top Five Estate Planning Mistakes and What Do You Need to Do When a Spouse Dies?

Reference: Forbes (Oct. 24, 2022) “Prenuptial Agreement: What Is A Prenup & How Do I Get One?”

If your spouse dies, you may have to decide whether or when to sell your house. There are some tax considerations that go into that decision.  This is addressed in the Kiplinger article, “Paying Taxes on a Home Sold After a Spouse’s Death“.

The biggest concern when selling property is capital gains taxes.  A capital gain is the difference between the “basis” in property and its selling price. The basis is usually the purchase price of property. So, if you purchased a house for $250,000 and sold it for $450,000 you would have $200,000 of gain ($450,000 – $250,000 = $200,000).

Couples who are married and file taxes jointly can sell their main residence and exclude up to $500,000 of the gain from the sale from their gross income. Single individuals can exclude only $250,000. Surviving spouses get the full $500,000 exclusion if they sell their house within two years of the date of the spouse’s death, and if other ownership and use requirements have been met. The result is that widows or widowers who sell within two years may not have to pay any capital gains tax on the sale of the home.

If it has been more than two years after the spouse’s death, the surviving spouse can exclude only $250,000 of capital gains. However, the surviving spouse does not automatically owe taxes on the rest of any gain.

When a property owner dies, the cost basis of the property is “stepped up.” This means the current value of the property becomes the basis. In general, when a joint owner dies, half of the value of he property is stepped up. For example, suppose a husband and wife buy property for $200,000, and then the husband dies when the property has a fair market value of $300,000.  In general, the husband’s one-half is stepped up to a basis of $150,000 (1/2 of $300,000).

In Louisiana, however, because Louisiana is a community property state (and assuming the home is community property and not seprate property), then both “halves” (both the husband’s one-half and the wife’s one-half) get stepped up to fair market value.  In other words, if the home is community property, and the home is sold shortly after your spouse’s death (so that little to no appreciation has taken plance), you will not even need to use the exclusion on the sale of the home (discussed above).  In other words, in community property states, where property acquired during marriage is the community property of both spouses, the property’s entire basis is stepped up when one spouse dies.

Keep in mind that this article only discusses tax implications.  There are other things to consider as well.  For instance, if the surviving spouse may have to go into a nursing home, the sale of the home (which would be an “exempt asset” for Medicaid), would be converted into a “non-exempt asset” (that is cash) after the sale.  So each case is different, and clients should not necessarily let the tax tail wag the estate planning dog.  Talk to an experienced estate planning attorney.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “The Tax Consequences of Selling a House After the Death of a Spouse” read also these additional articles: What to Do If You Want to Leave Your Children Unequal Inheritances and What are Your Early Signs of Dementia? and What Happens if I Take a Bigger RMD? and What are Benefits of Pre-Planning My Funeral?

Even if divorce is the last thing on your mind, when an inheritance is received, its wise to treat it differently from your joint assets, advises a recent article “Revocable Inheritance Trust: Inexpensive Divorce Protection” from Forbes. After all, most people don’t expect to be divorced. However, the numbers have to be considered—many do divorce, even those who least expect it.

Maintaining separate property is the most important step to take. If you deposit a spouse’s paycheck into the account with your inheritance, even if it was by accident, you’ve now commingled the funds.  Also, keep in mind that in Louisiana, income from separate property is still classified as community property, which may later cause the funds to become commingled by default even if you kept them separate.  For example, if you have $100,000 in an account, and the earnings on the account are $5,000 per year, after 10 years, you have (at least) put $50,000 (10 years times $5,000 per year) of community property funds into your separate property account.  To avoid this, Louisiana law requires that you deliver a “Declaration of Paraphernality” to the other spouse, which declares that the income from your separate property funds is community.

You might get lucky and have a forensic accountant who can dissect that amount and make the argument it was a mistake, as long as it only happened once, but the Court might not agree.  Keep in mind that in Louisiana, assets of either sposue are presumed to be community property, not separate property.

Long before the Court gets to consider this point, if your ex-spouse’s attorney is aggressively pursuing this one act of commingling as enough to make the property jointly owned, you could lose half of your inheritance in a divorce.

You might also try to mount a defense of the particular account or asset being separate property, by identifying the means of transfer. Was there a deed for real estate gifted to you from a parent or a wire transfer for securities? This information will need to be carefully identified and safeguarded as soon as the inheritance comes to you, in case of any future upheavals.

To spare yourself any of this grief, there are steps to be taken now to avoid commingling. Document the source of wealth involved as a gift or inheritance, maintain the property in a wholly separate account and consider keeping it in a different financial institution than any other accounts to avoid commingling.

Another way to safeguard gifts and inherited property (to answer the question “Can I Protect My Inheritance from Divorce?”) against a 50% divorce rate is to use a revocable trust. Creating a revocable trust to own this separate property allows you to make changes to it any time but maintains its separate nature, by serving as a wholly separate accounting entity. The trust will own the property, while you as grantor (creator of the trust) and trustee (responsible for managing the trust) maintain control.

For a turbo-charged version of this concept, you could go with a self-settled domestic asset protection trust. This is a more complex trust and may not be necessary. Your estate planning attorney will be able to explain the difference between this trust and a revocable trust.

One clear warning: if you have already created a revocable trust to protect your estate and it is not funded, you may feel like it would be most convenient to use this already-existing trust for your inheritance. That would not be wise. You should have a completely different trust created for the inherited property, and this would also be a wise time to remember to fund the existing trust.

Using a revocable trust this way will also require customized language in your Last Will, as you’ll want standard language in the Last Will to reflect the trust being separate from your other marital property.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Can I Protect My Inheritance from Divorce?” read also these additional articles: What Assets are Not Considered Part of an Estate? and Will Your Business Die When You Die? and Medicare’s Coverage of New Controversial and Expensive Alzheimer’s Drug Is Limited and What Estate Planning Documents are Used to Plan for Incapacity?

Reference: Forbes (April 13, 2022) “Revocable Inheritance Trust: Inexpensive Divorce Protection”

Community property refers to property acquired by one or both spouses during the marriage, provided the spouses live in a state that has a community property framework, says The Milwaukee Business Journal’s recent article entitled “Is what’s mine, ours? Understanding community property.”

There are not many community property states. That is because most states have adopted common law of property laws. The only community property states are Louisiana, Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington and Wisconsin. Several other states’ laws allow residents to “opt-in” to a community property regime. These states are Alaska, Tennessee, Kentucky and Florida.

While community property laws in the nine community property states differ in a number of ways, they all classify property either as community property—which is owned one-half by each spouse, or separate property, that which is solely owned by one spouse.

For example, in Louisiana, community property is referred to as being under the “community regime”, the default property regime for married persons in Louisiana.  Community property is property acquired during the marriage, and it usually includes the income from separate property (unless a declaration is paraphernality is signed and delivered to the other spouse).

Separate property is generally property acquired prior to the marriage, as well as gifts/inheritances during the marriage.  Significantly, any income from separate property is generally community property.  For example, if you have $100,000 in a bank account before the marriage, and the account earns 5% interest (resulting in $5,000 of income) during the marriage, and at the end of the year $105,000 is in the bank account, $5,000 is community property, and the original $100,000 is separate property.  This is important because over time, a separate property bank account may lose its character as separate property if you are not careful.  To change this result, you need to sign and deliver a “declaration of paraphernality” to your spouse to make sure that the income (the $5,000 in this hypothetical) is classified as your separate property.

Any property acquired during the marriage is deemed to be community property, and any property, of either spouse is presumed to be community property (unless the property claiming it is separate can prove that it is separate). In a common law property regime, property is owned by the spouse whose name is on the title.

In answering the question”What Does ‘Community Property’ Mean?”, it is important to remember that a basic feature of a community property legal framework is that title does not indicate ownership. Therefore, if a married couple deposits income earned during their marriage into an account titled only in the husband’s name, it is still owned one-half by the wife despite the fact that her name is not on the account.

Also, when answering the question, “What Does ‘Community Property’ Mean?”, remember that whether assets are classified as community property or separate property can have a significant effect on a couple’s life, including issues in estate planning, income and estate tax planning and creditors’ rights.

As far as estate planning, each spouse can only dispose of one-half of community property at his or her death. Under Section 1014 of the Internal Revenue Code, community property also gets a “double step up in basis,” which means that built-in appreciation on community property is eliminated at the death of the first spouse to die.  This is a great tax benefit of living in a community property state.  For example, if a husband and wife purchased land for $50,000 many years ago and it is now worth $200,000, there is a $150,000 “built in” capital gain which is potentially taxable income.  However, upon the death of the husband (with the wife surviving), both the husband’s half (valued at $100,000) and the wife’s half (also valued at $100,000) gets a step-up in basis to $200,000 eliminating the capital gains tax on both halves.  If the wife inherits to husband’s half, she can sell the proeprty for $200,000 and will not have to pay federal or Louisiana state income taxes on the sale.  This is because $200,000 sale price minus $200,000 new “stepped up”  basis equals $0 taxable income.

Finally, the classification of an asset as community or separate property can affect whether a creditor of one spouse can recover from that asset.

Importantly, should one of the spouses need to apply for Medicaid long term care assistance, a needs based program, even if the non-applicant is the one that has significant seprate property (with the applicant spouse being significantly poorer), Medicaid will still count the seprate property assets of the non-applicant spouse.  This is why long term care planning is important for everyone, even those who have significant separate property and those that have entered into premarital agreements.

Ask an experienced estate planning attorney who understands Medicaid qualification as well as federal and state income tax law about how community property laws may affect your financial and estate planning.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “What Does ‘Community Property’ Mean?” read also these additional articles: Can My Ex Get Some of My Estate?  and Will Eating More Fish Help Me Stay Healthy? and What’s the Best Way to Mess Up Estate Plan? and How Does a Trust Fund Work?

Reference: Milwaukee Business Journal (Jan. 1, 2022) “Is what’s mine, ours? Understanding community property”

Whether an ex who was named the beneficiary on their former spouse’s 401(k) will inherit may depend on the couple’s divorce agreement.

This type of question emphasizes how critical it is to update estate planning documents and beneficiary designations after a divorce.

Nj.com’s recent article entitled “Do I have a right to my ex-husband’s 401(k) plan?” says that this question also illustrates the importance of having a well-drafted and thorough divorce settlement agreement, one that details the rights and obligations of each spouse after divorce.

A comprehensive divorce agreement and timely modifications to wills and account beneficiary designations can eliminate any issues concerning the rights of a former spouse about the other’s retirement assets.

If there’s a governing instrument, like a marital settlement agreement and/or a Qualified Domestic Relations Order (QDRO), the terms of that governing instrument will be controlling.

A divorce decree or settlement agreement should specify the rights of each spouse to any retirement assets held by the other. If the decree or settlement agreement provides for one spouse’s interest in the other’s retirement asset, the death of the other spouse shouldn’t, by itself, extinguish that interest.

If the retirement asset is a 401(k), a QDRO would likely have been required post-divorce to secure the interest of the receiving former spouse. After this is prepared and filed with the court, the QDRO would be forwarded to the plan administrator of the retirement account for implementation and distribution to the former spouse.

However, if there’s no divorce decree, agreement or QDRO confirming the interest of a former spouse in the other’s retirement asset, the former spouse would likely not be successful trying to claim a portion of that asset—despite the fact that he or she is the named beneficiary. That’s because there’d be no governing instrument vesting him or her with the right to receive all or a portion of the asset.

BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.

If you liked this article, “Do I Get Ex’s 401(k) because I Was Named the Beneficiary?” read these additional articles: What Does an Elder Law Attorney Do? and Why Did ‘The Boss’ Sell His Music Catalog? and Should I Get a Medical Alert System? and What If I Become a Sudden Caregiver for a Senior?

Reference: nj.com (Dec. 13, 2021) “Do I have a right to my ex-husband’s 401(k) plan?”

If you neglect to update your estate plan after a divorce, everything you gave to your ex in your original will could very well add up to a nice post-divorce inheritance. Even in the most amicable divorces, it’s probably not what you had intended. Yet, as reported in the article “Rewriting Your Will After Divorce” from Investopedia, people do this.

Luckily, however, Louisiana law provides that if you are divorced after the execution of your Last Will and Testament, the provision leaving the ex-spouse property is revoked.  See Louisiana Civil Code art. 1608(5).  Likewise, any appointment of the ex-sposue to an official capacity in the will, such as an executor, is also deemed revoked.

Your will could provide, however, that your spouse’s legacy would remain intact even in the event of a divorce, although this would be a rare provision in a will.

So the short answer is “no” to the question “Is my will void if I get divorced?”  Only the legacy to the ex-spouse is revoked, and the ex-spouse is removed from any representative capacities to which he or she is appointed.

However, this should give the reader only partial comfort.  If what you left the ex-spouse is revoked, then who would receive what your ex-spouse was originally left?  That portion could pass under the laws of intestacy as it would if you didn’t have a will at all.  This may not be what you intend.

Further, if you live in Louisiana, and your have real estate in other states, the law of that state will likely control the disposition of the real estate, not Louisiana.  So if that other state does not have a similar law to Louisiana, your ex-spouse might not be written out of the will with respect to the property in the other state after all.

Also, keep in mind that there is not a similar provision that relates to trusts in Louisiana.  Therefore, if you have a living trust with your ex-spouse, a reformation or revocation of the trust should be part of the divorce decree or community property settlement.

So if your will leaves something to your surviving spouse and you are currently in the process of separating and divorcing, it’s time for a new will (or a trust), as soon as possible, even though your will is not void if you get divorced.

Also, don’t forget about assets passing outside of the will.  Assets with beneficiary designations, like life insurance, investment accounts and some retirement plans, go directly to the beneficiary listed on the account regardless of what your will might say!  If the beneficiary is your ex, you should also make those changes as soon as possible.

Even though your will is not void in the event of divorce, your estate plan must also update any property gained or lost during the divorce. If any assets are specifically identified in your will, be sure to update them.

The executor (the person named in your will to oversee the distribution of assets) probably has to be changed as well. If you had previously named your ex-spouse, it’s time to name a new executor.

Your will is also used to name a tutor (guardian) for minor children. If you have children with your ex, you will want to appoint a tutor (guardian) in case both you and your ex are not alive to raise them. If you die unexpectedly, your spouse will raise them, but you should still name a tutor. If a surviving parent has a serious problem, like addiction, child abuse or incarceration, naming a tutor in your will and documenting the reasons you believe your ex is an unfit parent may be a deciding factor in how a judge awards custody.

A will can be updated by writing a codicil, which is an amendment to a previous or a prior will. However, since there may be many changes to a will in a divorce, it is better to tear up the old one—literally—and start over. A prior will is revoked by physically tearing up and destroying the original and including language in the new will that it will revokes all prior wills. Your attorney will know how to do this properly.

The bottom line is that your will is not void if you get divorced.  But you will likely have to draft another will in its place anyway.  Also, your ex may have the legal right to challenge your will. This is why an estate planning attorney is so necessary to create a new will. In a divorce situation, the use of an experienced estate planning attorney can make the difference in your ex receiving a windfall and your new spouse or children receiving their rightful inheritance.

To learn more, read: Do I Have to Give My Husband’s Children from First Marriage Anything When He Dies? and No Kids? What Happens to My Estate? and I am Concerned That My Son-in-Law will get My Estate and What is Louisiana Forced Heirship?

BOOK A CALL with Ted Vicknair today to find out more about how you can plan your future for your and your family’s security.

This is a common question with second (or third marriages) and blended families. Questions frequently arise about Social Security, investments and savings, when the husband is divorced from the children’s mother and is paying child support until each child turns 18.

Nj.com’s recent article entitled “Are my husband’s kids from another marriage due assets when he dies?” says that these questions demonstrate why estate planning is critical to revisit after a divorce. You can take action to make certain that you’re taken care of, but if you don’t do this at the time of the divorce, it could be too late.

Let’s look at what you should know about beneficiaries and wills. First, beneficiary designations supersede a will. Beneficiary designations are applicable in the context of IRAs, 401(k)s, some Louisiana state retirement benefit programs, and life insurance policies and annuities.  Make sure that all beneficiaries and contingent beneficiaries are consistent with your wishes. These beneficiary designations on retirement accounts, pensions, life insurance policies, annuities and other accounts take precedence over what may be stated in a will.

Louisiana does not provide for beneficiary designations on certain assets like a house, vehicles, and real estate.  For married persons, some assets may be titled in the name of one spouse or in the names of both spouses.  Regardless, in Louisiana, all assets are presumed to be community property if the client is married, regardless of how the property may be titled.

When you enter into a subsequent marriage, both spouses should review and update their wills to have an idea of how a spouse’s estate would be disbursed at his or her death.  This is because substantial assets may be classified as “separate property” which would be distributed to the children of the spouse owning the separate property.

What else should one consider with respect to the question of “Do I Have to Give My Husband’s Children from First Marriage Anything When He Dies?” Keep in mind that Louisiana has not wholly repealed forced heirship.  In Louisiana, a forced heir is a child who was under the age of 24 at the time of death of their parent, or a child of any age, if that child suffered from a physical or mental condition at the time of the parent’s death that could potentially render that child unable to care for himself or his estate.  The amount that would have to be left to the forced heir will depend on how much property the parent died with, which is all of the parents separate property and one-half (1/2) of the parent’s community property.  Unfortunately, many practitioners don’t consider the implications of forced heirship, and it is a highly litigated issue in Louisiana.  You can protect yourself with proper planning if you have a forced heir (a child under the age of 24, or a child of any age if that child suffers from a physical or mental condition at the time of the parent’s death that could potentially render that child unable to care for himself or his estate).

If a husband is paying child support, divorce decrees may dictate that he purchase life insurance to cover that obligation upon his death. Therefore, there may be a life insurance policy for the children from a first marriage.  In such cases, if you are the husband, you may want to provide that the beneficiary of the policy is a trust for the children, assuming the court order mandating the policy would permits that.

With Social Security, if a spouse remains unmarried after the spouse’s death, he or she can claim a survivor spousal benefit as early as age 60, and if he or she is caring for the spouse’s children from the first marriage who are under 16 years of age, he or she may be entitled to receive a payment earlier. The deceased spouse’s unmarried children can also claim a survivor benefit until age 18, or longer if in high school or disabled.

Reference: nj.com (Aug. 4, 2021) “Are my husband’s kids from another marriage due assets when he dies?”

To learn more, read: How Do I Avoid Estate Planning Mistake with a Blended Family? and How to Do I Address an Estranged Child in My Estate Planning? and What Should Small Business Owners Know about Estate Planning? and Is a Cup of Joe Healthy for Seniors?

BOOK A CALL with Ted Vicknair today to find out more about how you can plan your future for your and your family’s security.

Just because you don’t have children or heirs doesn’t mean you should not write a will. If you decide to have children later on, a will can help protect their financial future. However, even if you die with no children, a will can help you ensure that your assets will go to the people, institutions, or organizations of your own choosing. As a result, estate planning is necessary for everyone.

Claremont Portside’s recent article entitled “What Happens to Your Estate If You Die With No Children” says that your estate will go to your spouse, unless stated otherwise in your will.  However, in Louisiana, the rule is much different.  In Louisiana, if you die without a will and without children, all of your separate property is  inherited by your biological family.  These inheritors can include your siblings, neices and nephews and your parents.  In Louisiana, only community property is inherited by your spouse if you die without a will and without children.

Fortunately or unfortunately, property owned by most spouses is community property.  You may want your one-half share of your community property to be left to your spouse.  However, if you spouse dies soon after you, all of your property will wind up in the hands of his or her children (likely from a prior relationship) or your spouses siblings.

There is a better way.  You can provide in your last will and testament that your one-half community property share is subject to a “usufruct” for life in favor of your spouse, then at your spouse’s death, your one-half share of your community property could be left to your family, such as your siblings or neices and nephews.

When it comes to separate property, problems can about in that area as well.  Even if a person has separate property, many people without children want their separate property to be inherited by their surviving spouse.  You can provide that your separate property be subject to a “usufruct” in favor of your surviving spouse, then at his or her death, the separate property could devolve to your extended family.  This is particularly important when a married (or unmarried) couple are living in the house owned 100% as separate property by one of them.  Without proper planning, the survivor can be left homeless.

The best way to make certain your estate goes to the right people, and that your loved ones can divide your assets as easily as possible, is to write a will. Ask an experienced estate planning attorney to help you. As part of this process, you must name an executor. This is a person you appoint who will have the responsibility of administering your estate after you die.

It’s not uncommon for people to appoint one of their children as the executor of their will. But if you don’t have children, you can appoint another family member or a friend. Select someone who’s trustworthy, responsible, impartial and has the mental and emotional resources to take on this responsibility while mourning your death.

You should also be sure to update your will after every major event in your life, like a marriage, the death of one of your intended beneficiaries and divorce. In addition, specifically designating beneficiaries and indicating what they will receive from your estate will help prevent any disputes or contests after your death. If you have no children, you might leave a part (or your entire) estate to friends, and you can also name charities and other organizations as beneficiaries.

It’s important to name who should receive items of sentimental value, such as family heirlooms, and it’s a good idea to discuss this with your loved ones, in case there are any disputes in the future.

Even without children, estate planning can be complicated, so plan your estate well in advance. That way, when something happens to you, your assets will pass to the right people and your last wishes will be carried out. Ask an experienced estate planning attorney for assistance in creating a comprehensive estate plan.

To read more about planning without children, read these other great articles:  Planning for Singles and Does a Married Couple without Children Need a Will? and What Do I Need to Know about Second Marriage Estate Planning?

Reference: Claremont Portside “What Happens to Your Estate If You Die with No Children”

BOOK A CALL with Ted Vicknair today to find out more about how you can plan your future for your and your family’s security.

The Wealth Advisor’s recent article entitled “Remarried With Children? 5 Estate Planning Mistakes to Avoid” says that you can’t guarantee that everyone in the blended family will be happy with the arrangements you’ve made with a second marriage.

Estate Planning Mistake #1: Failing to change beneficiaries. With a beneficiary designation (such as with life insurance policies, IRAs, 401ks), the money passes directly to your intended beneficiary without probate. Look at all of your financial accounts to be certain that your spouse is designated the beneficiary if that’s what you want. Check your life insurance beneficiaries because these payouts also bypass probate.

Estate Planning Mistake #2: Failing to update your last will. Your last will determines much of who gets the assets you and your spouse accumulated during your lifetimes. You probably don’t want your ex-spouse to get these. People on their second marriage frequently decide that the surviving spouse gets all the assets; upon the death of the second spouse, the remaining assets will be divided evenly among all of the children. There are ways to make that happen, but it takes very special legal planning.

Estate Planning Mistake #3: Treating all heirs equally. Most spouses aren’t financial equals when they marry, and this is particularly so in second marriages. If your new spouse moves into your house, for example, you may want your children to get the proceeds when it’s sold, not your spouse or your spouse’s children. There are many reasons why parents don’t treat children equally, including when there’s a child who’s disabled or has special needs. A child may also suffer from an addiction and require a trust that provides stipends at regular intervals to the beneficiary and deters creditors from getting money in the trust.

Estate Planning Mistake #4: Failing to give while you’re still alive. If you’re planning to leave money to your kids, you might think about giving it to them now.

Estate PLanning Mistake #5: Failing to work with an experienced estate planning attorney. If you’re older and on your second marriage, your life is probably complex with ex-spouses and children and stepchildren. Blended families and comingled assets make things complicated, as does a child with special needs or an aging parent. An experienced estate planning attorney can work through all of your issues and make sure you have the best and most comprehensive plan for your circumstances.

Estate Planning Bonus Mistake #6: Leaving everything to the surviving spouse.  Sometimes couples will agree that they leave everything to one another, and then the survivor (who would then own everything) will treat the predeceased spouse’s children from a prior marriage equally.  In my experience, unless you trust your spouse implicitly to do this, this can be a mistake.  This is because the survivor has every right to modify is or her will after your death to leave everything to the survivor’s children.  A better way to establish this “deal” between the spouses is through a living trust established during your lives instead of joint wills.

Other articles that you can read on this topic include these:  Planning for Blended Families and Blended Families Create Estate Planning Challenges and Blended Family Estate Planning.

Reference: The Wealth Advisor (July 12, 2021) “Remarried With Children? 5 Estate Planning Mistakes to Avoid”

BOOK A CALL with Ted Vicknair today to find out more about how Louisiana’s unique laws can impact your estate planning.

Seniors who are married to younger spouses have a special situation for estate planning, a situation that’s become more common, according to Barron’s recent article “Couples with Big Age Gaps Require Special Attention.”

This kind of family requires planning for the older spouse’s retirement needs and healthcare costs, while determining how much of the older spouse’s wealth should go to the children from any previous marriages while balancing the needs of a future child with a younger spouse. Beneficiaries for all financial accounts, last wills and all estate documents need to be updated to include the new spouse and child. The same goes for medical directives and power of attorney forms.

Social Security and retirement account considerations differ as well. The younger spouse may begin receiving their own Social Security at age 62, or a portion of the older spouse’s Social Security, whichever is greater. If the older spouse can wait to file for Social Security benefits at age 70, the younger spouse will receive more spousal benefits than if the older spouse claims earlier. Social Security pays the survivor’s benefit, typically based upon the older spouse’s earnings.

Pension plans need to be reviewed for a younger spouse. If the pension plan allows a survivor benefit, the surviving spouse will receive benefits in the future. IRAs have different beneficiary distribution rules for couples with significant age differences. Instead of relying on the standard Uniform Lifetime Tables, the IRS lets individuals use the Joint Life and Last Survivor Expectancy Table, if the sole beneficiary is a spouse who is more than ten years younger. This allows for smaller than normally Required Minimum Distributions from the IRA, allowing the account a longer lifetime.

Families that include children with special needs also benefit from trusts, as assets in the trust are not included in eligibility for government benefits. Many families with such family members are advised to use an ABLE Savings Account, which lets the assets grow tax free, also without impacting benefit eligibility. There are limits on the accounts, so funds exceeding the ABLE account limits may be added to special needs trusts, or SNTs.

A trustee, who may be a family member or a professional, uses the SNT assets to pay for the care of the individual with special needs after the donor parents have passed. The child is able to maintain their eligibility.

Nontraditional families of any kind with children require individual estate plans to protect them,  which usually involves trusts.

Trusts are also useful when there are children from different marriages. They can protect the children from the first marriage and subsequent marriages. A wisely constructed estate plan can do more than prevent legal battles among children—they can preserve family harmony in the non-traditional family after parents have passed.

Another good article that I posted with respect to unconventional family estate planning is What Do I Need to Know about Second Marriage Estate Planning?  and Blended Families Create Estate Planning Challenges.  And here are some other articles: How Do I Align Retirement Planning with Planning for a Special Needs Child? and What Do I Need in My Estate Plan?

Reference: Barron’s (July 27, 2021) “Couples with Big Age Gaps Require Special Attention”

BOOK A CALL with Ted Vicknair today to find out more about how Louisiana’s unique laws can impact your estate planning.