The process of estate planning frequently requires you to focus on, and contemplate, some scenarios, possibilities, and eventualities that are less than pleasant to consider. Your own immortality, after all, is at the heart of your estate plan. If you are married, you may also have discussed the likelihood that one of you will outlive the other. The thought of your spouse remarrying after your death may be an emotional subject matter; however, it can also have a very significant financial impact as well that you need to be aware of, and plan for, in your estate plan. Asset protection trusts are one of the most common estate planning tools used to keep assets safe in the event your spouse remarries after your death.
“If Something Happens to Me…”
At some point in time, most married couples have the “If something happens to me…” conservation. This is one of those emotionally deep conservations where you tell your spouse what you hope he/she would do in the event of your death. Some people cannot envision their spouse with someone else and implore their spouse not to remarry. Others, however, want their spouse to find love again, if possible, and consequently encourage their spouse to remarry if the opportunity presents itself. Whether you are a member of the first train of thought or the second, the reality is that if you are the first to go, your spouse could end up getting remarried. Since you will no longer be here, why does it matter anyway? Aside from any emotional trauma the thought of your spouse remarrying may cause you while you are alive, there are potentially serious financial consequences that could flow from that marriage. Specifically, your spouse’s remarriage could put your hard-earned assets at risk which is particularly troublesome if you have children who are supposed to inherit those assets.
Reciprocal Estate Planning
Particularly if your marriage is one of longevity that includes children, there is a good chance that you and your spouse created reciprocal estate plans. In essence, this means that if your spouse dies first, you inherit all of his/her assets and if you die first your spouse inherits all of your assets. The surviving spouse then passes down the combined assets to the children upon his/her death. This type of estate planning makes sense and is simple enough to create and implement. That is, however, as long as your spouse does not remarry after your death.
How Can Your Spouse Remarrying Threaten Your Assets?
The thought of your spouse remarrying may cause you to feel anything from happiness to betrayal; however, even if you want your spouse to remarry after your death, you still need to consider how that marriage could impact your combined assets. Remember, if your assets all passed to your spouse at the time of your death, that means that when your spouse remarries he/she brings your combined assets into that new marriage. The new spouse now has a potential claim to those assets in the event of a divorce and also become a legal heir to your spouse’s estate once the marriage occurs. If those assets were intended to be passed down to your children upon the death of the last parent, the new marriage could threaten that plan.
How Can Asset Protection Trusts Help?
The good news is that careful estate planning now can protect your assets in the event of your spouse’s remarriage. A Family Wealth Trust (FWT) may be the answer. A FWT is a type of asset protection trust that can protect your assets while still providing for a spouse and/or children. Your FWT can stand alone or as a sub-trust within a larger trust. Your children are designated as the beneficiaries of the trust. Your spouse can be named as the Trustee of this trust, or you can appoint a close friend or professional Trustee. Your spouse can use or benefit from the property held in trust, but he/she does not own those assets. Ownership in the property in the Trust is reserved for your children.
Contact Asset Protection Trusts Attorneys
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding asset protection trusts, contact the experienced trust attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.