More and more we see couples marrying where each spouse has children by a previous marriage and possibly substantial assets accumulated in advance of the wedding. Without careful consideration of the problems and the law, unanticipated and unwanted consequences may disrupt the estate plans of the individuals. Certain legal rights arise at the time of marriage. One of those is called the Spousal Right of Election. Basically, it allows a surviving spouse to take a share from the estate of a deceased spouse, regardless of the terms of the decedent’s will. The share entitlement is the greater of 33 1/3% of the estate or $50,000. The computation of this elective right takes into account more than property passing under a will.

It includes certain jointly owned property, the value of gifts made before death, and the value of all pension or profit-sharing plans. The surviving spouse has the legal right to pursue return of property if necessary to satisfy the elective share. Federal law further affects the pension benefits each spouse may be entitled to. The right to change beneficiaries to other than a spouse is severely restricted. If not carefully planned at the time of the marriage, it is possible that there will be no opportunity at a later date to designate a non-spouse beneficiary (without the consent of the spouse).

In addition to the above rights, a surviving spouse is entitled to “exempt property” as defined in the law. The survivor may take one automobile valued at no more than $25,000 plus $25,000 in cash. Household goods and other property specified in the law may also be taken, even if the will disposes of these items to others. If a surviving spouse claimed all possible exempt property and elected against the will, it could result in a minimum transfer to the spouse of $142,500. This is before any other beneficiary receives anything.

Another concern of the couple may be the prospect of the new marriage ending other than by the death of one spouse. The law provides for the definition of marital property, which would be divided between the parties upon dissolution of the marriage. There is also a possibility of periodic maintenance payments being allowed to a spouse (formerly called alimony). If these are not addressed in advance of the marriage, then it is left to the court to decide the issues. As anyone knows who has gone through a separation or a divorce, this can be a very expensive and unpleasant experience.

A solution to all of the above problems can be found in a carefully planned and drafted pre-marital agreement. Such an agreement can cut off the right of election of each spouse in the estate of the other, waive rights to exempt property, authorize the change in pension or profit sharing plan beneficiaries and define the rights of each spouse in the event of termination of the marriage. The agreement is binding on both parties so long as there is a full disclosure of the underlying facts and no fraud.

 The agreement can even be entered into after marriage, but often the parties are less prone to do so then, particularly if marital difficulties have already started. Addressing the issues involved in this process can be awkward for the parties when they are in love and engaged. That awkwardness, however, must be weighed against the difficulties which would be encountered if the problems are left to be worked out as they arise.

The execution of such an agreement should put the children of the previous marriages more at ease with the new spouse, since the spouse can now be looked upon as a new family member and not as an economic competitor. Another estate planning tool frequently used in the second marriage situation is life use of a residence. If one spouse owns the house in which the couple lives, a provision can be added to that person’s will giving the surviving spouse the right to use the house for life, but then transferring the property to the children of the owner at the death of the survivor. This can provide the double benefit of protecting the property for the children while protecting the living arrangements for the spouse. Such provisions have complications which must be addressed, however, such as responsibility for payment of repairs and expenses.

Also, it must be decided what is to happen to the property if the spouse is unable to live in it or chooses to move. With the new provisions of the right of election law, the life use of real estate would not satisfy the spouse’s right and would leave the spouse able to elect a share outright. A spousal right which terminates will not satisfy the elective share, except in very limited circumstances. If a pre-marital agreement has not been executed, there are still several courses of action which can be taken by the estate owner to maximize the property passing to the children and minimizing the damage to the plan caused by the spousal rights. Addressing the difficult questions of a second marriage early on, however, can preserve property for the children as well as keeping all of the members of both families on much better terms.

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