So you’ve decided to merge your families. Amidst all the excitement and anxiety, you probably forgot about estate planning (don’t worry, you’re not alone). But remarriage raises several issues unique to estate planning.
First, you need to make sure that you have replaced your former spouse as beneficiary of any insurance policies and retirement plans. In Nevada, as in many other states, state law automatically disinherits ex-spouses. However, in some cases federal law overrides state law. For example, if you have an insurance policy or retirement plan that is governed by the Employee Retirement Income Security Act of 1974 (ERISA), which is most employer provided plans, then an ex-spouse is not disinherited and will inherit those monies if named as the beneficiary.
The result isn’t much better if the ex-spouse is automatically disinherited but you fail to name a new beneficiary. In that case, the beneficiary is your estate and any proceeds from those accounts generally require a court order to be distributed after your death. Obtaining an order can take more time than desired when the new spouse or children need money for support.
Second, the ex-spouse may gain control of your assets for the benefit of your children. If you name your minor children as beneficiaries of your life insurance, retirement plans or other assets, chances are the minor children won’t get that money (even if you want them to). Most states, insurance companies and account custodians won’t distribute to minors. In such cases, a guardian is appointed to hold and use the money for the benefit of the children. Most likely, that guardian is the child’s surviving parent. I know, you thing that the ex will use the money wisely and only on the children. Ask yourself these questions, is the ex remarried; does the new spouse have children; is there a boyfriend/girlfriend? Maybe it’s not such a good idea to give the ex control.
Proper planning can avoid unwanted consequences. If you do nothing, you may inadvertently reduce your children’s inheritance. In most states, if you don’t name beneficiaries, state law will decide who gets your assets. In a blended family, this means your children will share your assets with your new spouse. Perhaps just as meaningful is if you put your new spouse on all of your assets. If you predecease your new spouse, she or he will inherit everything and your children would receive nothing.
As you can see, steps need to be taken to protect your loved ones, even the new ones.