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Second marriages might require extra estate planning

Considering the high rate of divorce in Michigan and nationwide, many readers might agree that second marriages are no longer a rarity. Yet the financial and legal issues that can confront couples in their second marriage -- especially spouses who have children from a first marriage -- may require some careful planning.

One question that can arise among children either a first or second marriage is how a revocable trust should be administered if the parent that created the instrument becomes incapacitated. For example, a parent may have created a trust and named the children of her first marriage as its beneficiaries, as well as her spouse and possibly additional relatives. Upon remarrying, the parent may have had additional children or acquired stepchildren. The children from that second marriage may wonder about their legal right to any potential inheritance.

As a preliminary matter, a distinguishing feature of a revocable trust is that its creator retains control of its disposition, including which beneficiaries are named, while he or she is in sound mental health. Adding new beneficiaries or changing terms can be accomplished quickly and easily by simply filing an amendment to the trust.

In addition, the estate and trust laws of many states provide that a divorce decree automatically revokes gifts in a trust to a former spouse, as well as to relatives of a former spouse -- a definition that might also exclude the stepchildren. Instead of going to those recipients, who interest might be deemed to have lapsed, the trust assets will pass to any alternate beneficiaries named in the instrument. Another possible outcome might be the trust assets going to the estate, if the trust language specifically included such a provision for lapsed gifts. A divorce attorney might be able to provide more specific examples of how Michigan state laws affect various inheritance instruments.

Of course, a divorce decree might specifically state otherwise, thereby overriding the default outcome called for a state’s estate and trust laws. Similarly, a spouse on the verge of a second marriage might be well advised to review the language of any revocable trusts or other inheritance or estate documents.

Source: mysanantonio.com, “How does divorce affect gifts made in trust?” Paul Premack, April 29, 2013

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Second marriages might require extra estate planning | Peter A D'Angelo, Attorney at Law, PLC