With the proliferation of second marriages and blended families it is crucial to have adequate estate planning and incapacity planning to prevent future issues and disputes, such as:
- Disputes over use (and abuse) of Powers of Attorney
- Unintended asset distribution by right of survivorship
- Family caregivers
- Joint tenancies and the legal implications
- Contested estates
Cohabitation and Marriage Agreements
The best way to protect assets when entering a new relationship is to have either a Cohabitation Agreement or a Marriage Agreement, particularly in second marriages where there may be children from a previous relationship. This is the best way to protect your assets and estate.
Joint tenancy
Many married couples hold the majority of their assets jointly and are often advised (by lawyers, financial institutions, friends, relatives etc.) to keep them in joint tenancy to avoid probate fees.
However, this may not necessarily be the most appropriate way of holding assets, particularly if there are children form previous relationships.
When the first spouse dies, the family assets pass outside the will by right of survivorship. The surviving spouse may re-marry, or change his or her will, excluding the children of the deceased spouse. This can lead to conflict both before and after the first spouse dies.
Mutual Will Agreement
The most effective way to prevent a surviving spouse from disposing of his or her assets, or changing his or her will, is to have a Mutual Will Agreement.
This is a useful tool when couples own property jointly and want to make sure the surviving spouse is able to use the family assets for their care later on in life if need be.
A Mutual Will Agreement also gives a level of comfort to the children of the deceased spouse that the surviving spouse will not disinherit them.
A Mutual Will Agreement is essentially a contract between the spouses. The spouses will have likely done a “mirror image” will, whereby the on the death of the first spouse the estate goes to the second spouse, and on the death of the second spouse, the family assets are divided among all the children of the previous relationships.
The wills are attached to the Mutual Will Agreement and the parties agree neither will change their will when the first spouse dies.
The Mutual Will Agreement is enforceable by the heirs and beneficiaries of each spouse.
Severance of a Joint Tenancy
Another tool can be the severance of the Joint Tenancy.
Each spouse then owns their share of the asset and when that spouse dies the asset falls into his or her estate and does not pass to the other spouse by right of survivorship. This ensures the children of each spouse receive their share of their parent’s estate.
Life Interest
If there has been a long marriage, another way of protecting a spouse from having to sell the family home when the first spouse dies is by effective estate planning.
Each spouse can provide a life interest in their share of the home to the surviving spouse. This tool can also be used for other family assets, such as investments and bank accounts.
If you have a blended family, are worried about your estate and in need of estate planning, please contact our office for a half hour free consultation.