What is remarriage risk?
What is remarriage risk?
Remarriage risk is when you die, your husband or wife remarries, and then your money goes to the your spouse’s new significant other rather than to your own children.
So how do you protect your children’s inheritance from being inadvertently redirected to your spouse’s new wife or husband?
The simplest solution is two-fold:
Create separate revocable trusts now while you are living (one trust for you and one trust for your spouse) and put your assets in your trust and your spouse’s assets in his or her own trust.
Structure your trust so that the assets can be used for the benefit of your spouse, but prevents the assets from being distributed outright to your spouse if you predecease him/her.
But what about our joint property?
If you own your home or other real estate jointly with your spouse, then you can transfer one-half of your home to one trust and the other half to your spouse’s trust.
On a side note - there are generally no tax implications of transferring your home to to your trust because of the “grantor” trust rules - meaning for income tax purposes, the home is still treated as if it were owned in your names individually/jointly. There’s also generally no implications with your mortgage or with insurance - the mortgage is covered under a federal exemption law called the Garn- St Germain Act and, for insurance purposes, you usually just need to show your insurance representative the updated deed and they’ll simply add your trust as an additional insured.
You’ll want to work with your estate planning attorney to make sure the trust terms accurately reflect the type of assets that would be held and managed within your trust for the benefit of your spouse, and to make sure that there are proper provisions in place to be able to provide for your children prior to your spouse death. For example, even if your spouse survives you, then you’d still likely want to give the trustee the ability to make distributions for your child’s health, education, maintenance, and support, plus special occasions (like a down payment on their first home, assistance paying for their wedding, gifts for grandchildren, etc.)
Once you have your trust set up and funded properly, you can rest easy knowing that whatever happens, your children’s inheritance will protect from remarriage risk.
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Joseph M. Lento, J.D.
Your Local Estate Planning Attorney
www.PerennialEstatePlanning.com
Massachusetts Office:
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Stoneham, MA 02180
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Manchester, NH 03101
