1. Reasons for Estate Planning and Asset Protection when you Remarry.

- If your new marriage is later dissolved, you will want to retain control and ownership of the assets which you owned prior to that marriage, including the appreciation on those assets.

- You should make provisions to make sure that your new spouse will be taken care of if you are the predeceasing spouse and your new spouse survives you. However, in most cases you do not want your new spouse to inherit everything if you have children from a prior marriage.

- Your new spouse is not likely to pass his or her inheritance from you to your children from your previous marriage. In other words, your new spouse may disinherit your children from a prior marriage.

- Therefore, in most cases you do not hold most of your property in joint tenancy or pass your property directly to a new spouse. Instead you may want to use a trust arrangement.

- Also, don't forget about your former spouse. Your former spouse may still inherit from you if you have transferred assets to one of your children. Because if one of your children dies prematurely and does not leave a family of his or her own, then your former spouse will likely inherit 1/2 (or all) of that child’s estate (including assets which you transferred to that child.) For example, if you are paying life insurance premiums on a life insurance policy on that child’s life or transferring assets to that child, if that child dies without a spouse or children, then your former spouse will inherit 1/2 (or all) of that property.

2. Tax Reasons for Estate Planning and Asset Protection.

- You will want to obtain a new stepped-up income tax basis for the Surviving Spouse’s property upon the death of the Predeceasing Spouse. This is true no matter which spouse is the Predeceasing Spouse.

- You will want to fully utilize the $1.6 million estate tax exemption, as needed, of your new spouse so that both of you can shelter the full $3.2 million from estate tax.

- If you split your estate between your new spouse and your children from a previous marriage, standard will and trust provisions may result in your children paying all of the estate tax and your new spouse may pay no estate tax. Estate tax should be fairly apportioned.

3. Potential Solutions (Consider the legitimate needs of both your new spouse and your children)

a. A WELL-DRAWN PRENUPTIAL AGREEMENT WILL HELP:

(1) prevent your new spouse form having a legal right of up to 50% of your estate.

(2) protect your separate property in case of a dissolution of your marriage. Make sure that your agreement also provides that appreciation on your separate property is also separate property. Otherwise, the appreciation on your separate property which occurs during your marriage will be marital property and the new spouse may own 1/2 of that appreciation.

b. A REVOCABLE TRUST IS VERY EFFECTIVE for the preservation of separate property because the new spouse generally will not be a co-trustee of your trust. Therefore, the new spouse should not be able to claim that he or she was active in the management and preservation of your separate property.

c. PENSION PLAN BENEFICIARY WAIVERS should also be signed by the new spouse.

The proper solution for your estate depends on several factors:

a. IF YOUR ESTATE IS SMALL, you may want much of your property to be held in trust where all income goes to your surviving spouse. You may want your surviving spouse to have limited access to principal for his or her support. After the surviving spouse’s death or remarriage, the balance of your estate will then go to your children.

b. IF YOUR ESTATE IS LARGE, you may want to split your estate. A portion of your estate will be held in trust with income and principal paid to the surviving spouse the same as in the immediately preceding paragraph a. The balance of your estate may be distributed outright to your children or held in trust for their benefit.

c. IF THE PREDECEASING SPOUSE OWNS THE PERSONAL RESIDENCE, generally the Surviving Spouse should be allowed to live in the personal residence without paying rent until either remarriage or death. Otherwise, the heirs of the Predeceasing Spouse can require the Surviving Spouse to move out of that residence immediately after the Predeceasing Spouse’s death.