A second marriage can be a balm for the heartache of losing a spouse, be it through death or divorce. Nevertheless, if there are children or other heirs involved, you should consider carefully what will happen with your money and possessions when you pass on. You can never guarantee that everyone in the blended family will be happy with the arrangements you have made with a second marriage. But you can at least avoid some mistakes so that your immediate family doesn't get shut out of an inheritance — or worse, that an ex-spouse gets an inheritance that you didn't plan on giving. Most people mean well: They want their spouse to inherit their possessions when they die, and their heirs to split what's left when the spouse dies. And they want everyone, including their children and their spouse's children, to be happy. No one wants a brawl to break out when the will is read. Here are five ways to prevent that. Mistake #1: Not changing beneficiaries One advantage of changing the name of the beneficiary is that the money will go directly to the intended person — often, the surviving spouse — without probate, which is the legal process of settling an estate. You should go through all of your financial accounts — checking, savings, retirement — to make sure that your spouse is designated the beneficiary if that's your intention. Check life insurance beneficiaries, too, since these payouts also bypass probate. You can also designate your children as secondary beneficiaries, so they will receive the assets in the event you have both died. While you're poring over important documents, remember to update legal directives — such as a medical power of attorney — to make sure that, say, it's your current spouse and not your ex who is charge of making medical decisions in case you're incapacitated. Mistake #2: Not changing your will Although changing your beneficiary on financial documents will avoid leaving your 401(k) balance to your ex-spouse, your will determines much of who gets the rest of the assets you and your spouse accumulated during your lifetimes. You probably don't want your ex-spouse to get your home, either. Typically, people on their second marriage decide that the surviving spouse gets all the assets, and upon the death of the second spouse, the remaining assets will be divided evenly among all of the children. This assumes, of course, that in five or 20 years everyone will still be getting along — and that your spouse, upon your death, won't write a new will that shuts out your side of the family. You could also draw up a contract that would require your surviving spouse to maintain the will as it is. Although some estate lawyers use them, will contracts have their drawbacks. You should also figure out in advance who will get important family items — even if their value is largely sentimental. You may not want your spouse's children to inherit your great-great grandfather's Civil War sword or your mother's coin collection. Mistake #3: Treating all heirs equally Most spouses aren't financial equals when they marry, and this is particularly true for second marriages. If your new spouse moves into your house, for example, you may want your children to get the proceeds when the house is sold, rather than your spouse or your spouse's children. Similarly, if you brought more assets to the marriage, you may want more of the money to go to your heirs than your spouse's heirs. "There's no rule that says all children have to be treated equally,” says Jason Smolen, a principal in the Vienna, Virginia, firm SmolenPlevy Attorneys and Counsellors at Law. “There are a number of reasons why parents don't treat children equally — sometimes it's an unfortunate situation where a child is disabled, either mentally or physically.” In those cases, you'll have to discuss with your spouse how to ensure that child is cared for, perhaps through an ABLE (Achieving a Better Life Experience) account or a trust. Other times, Smolen says, the problem is conduct. A child may have a gambling problem, suffer from addiction or be a compulsive spender. Some parents may simply decide that after death children are responsible for their own actions, and if they lose their inheritance by betting on Seabiscuit in the fourth race at Pimlico, well, that's the way things go. Other parents may not be able to stand the thought of an inheritance being squandered. “Essentially, you want to regulate the flow of money to a child like that,” Smolen says. Doing so costs money: You'll need to create a trust and appoint an executor to manage the assets. A so-called “spendthrift trust” is one solution. It doles out money at regular intervals to the beneficiary and deters creditors from getting the money in the trust. Mistake #4: Waiting until you're gone to give If you're planning to leave money to your children, you might consider giving it to them now, rather than in your will. You'll get the pleasure of seeing them use that money while you're still on the planet. You can give up to $15,000 per person without having to pay the federal gift tax or deal with the IRS. (Recipients typically don't pay tax on gifts.) It's an enormous break. If you and your spouse have four married children, you can give each child and their spouse $15,000, or $30,000 per lucky couple, without triggering federal gift taxes. In addition, the giving limit is per giver: Your spouse may also give the same amount. If you and your spouse have four married children, you and your spouse can give $60,000 per couple, for a total gift of $240,000 per year for all eight people, without triggering the gift tax. You won't have to alert the IRS unless you exceed the $15,000 per person limit. If you do, you'll have to file Form 709 . But even then you probably won't have to pay taxes on the gift because of the lifetime gift exclusion of $11.7 million per person (in 2021), or double that ($23.4 million) for married couples. If you exceed those limits, you'll owe gift taxes on the amount above the lifetime limit. Mistake #5: Skipping the lawyer If your assets are few and your circumstances uncomplicated, you can probably get away with going online and drafting a do-it-yourself will. It's a simple, inexpensive option — and it beats having no will at all. But if you're older and on your second marriage, odds are good your life is anything but uncomplicated. Ex-spouses, blended families and comingled assets up the complexity quotient, as does a child with special needs or an aging parent. It may be wise to invest the time and money in getting a thorough estate plan drawn up by a professional. While consulting an attorney comes at a cost, you'll get the comfort of knowing that you, and not a probate judge, will decide who gets what when you're gone. And you'll also know that your ex won't be spending your 401(k) money. Original Article #forme

When a marriage is falling apart, the first thing on your mind probably isn’t your estate plan – but it is something you’ll have to consider soon. Not only is it important to address issues of inheritance (particularly if you’re affluent and have a lot of separate assets from your spouse), but you also need to address concerns like who has your powers of attorney and health care proxies. If it’s currently your spouse, that could lead to unintended consequences for you and a lot of personal distress for your loved ones. Can you update your estate plan before or during the divorce? Generally, you want to obtain informed legal guidance about your estate plan as soon as you believe a divorce is likely to happen. That way, you can update your beneficiary designations and other documents right away. If your spouse is named as the executor of your estate, which is not uncommon, that’s also something you may wish to change. Once either you or your spouse file for divorce, your options are more limited. Typically, temporary orders are put in place that don’t permit either spouse to make any major changes to the beneficiaries on their accounts or executor designations until the terms of the divorce have been negotiated and made final. This is to preserve the “status quo” of the marriage until all major issues can be addressed. The exception to this rule involves any designations you have made regarding your powers of attorney or health care proxy. Those can (and should) be updated as soon as you no longer want your spouse to hold that authority on your behalf, and there is no prohibition against it even while a divorce is pending. What happens to your estate plan after the divorce is final? Under the Illinois Probate Act, the provisions of your will regarding your ex-spouse do not automatically get revoked by your final divorce decree. The only thing that changes is that your spouse will no longer be granted executor powers or have any control over the asset distributions of the estate. If you named an alternative executor, that would be the person who will be tapped for the job, or the court will have to appoint a personal representative over your estate. However, your ex-spouse will remain a beneficiary or designated agent on all other documents until you change them, so that makes it important to immediately review any: Life insurance policy beneficiary designations Trust that can be modified Pension and annuity beneficiaries Bank account and investment beneficiaries Powers of attorney and health care proxies (unless already changed) would also need to be updated. What if you were blindsided by the divorce? Sometimes, people don’t have any clue that their spouse wants out – and that’s often deliberate on the spouse’s part. When you’re going through a divorce, the number of things that demand your attention can feel overwhelming. Regardless of the stage of divorce you are in, it’s always easier to proceed with informed legal guidance. Original Article #Forme

Beyond the emotional impact that divorce can have on couples of any age that decide to split, it can have a potentially devastating effect on the retirement plans of those who divorce later in life. Divorce after 50 usually results in a loss of income for both parties, which can mean working longer to fund a single retirement. Choosing the house over other assets. For many people, choosing the family home in a divorce is more of an emotional than a rational choice. If the housing bust of the last few years has taught us anything, it’s that you can’t count on a house as a nest egg. Plus, a house is likely to cost you more as well in property taxes, maintenance and unexpected expenses like a roof or furnace replacement. So don’t automatically sacrifice retirement assets for a house until you weigh the costs. Forgetting to consider the tax implications of retirement assets. If you decide to divvy up retirement savings by one of you taking the 401(k) and the other taking the Roth IRA, you need to realize that these are not equal distributions. Withdrawals from a 401(k) or traditional IRA will be taxed during retirement, while withdrawals from a Roth IRA are not taxed during retirement. Therefore, the payout from the Roth IRA will be larger over time. Rolling over a spouse’s retirement account into an IRA after the divorce. If you are under the age of 59 1/2 at the time of your divorce, you have a one-time opportunity to withdraw money from an ex-spouse’s 401(k) or 403(b) without having to pay the 10 percent early withdrawal penalty as long as those funds have been allocated to you under a qualified domestic relations order (QDRO). If you do a rollover and need to tap the account early, you will have to pay the tax penalty. And while it may be tempting to dip into retirement savings now, remember that you are eroding the nest egg that needs to last you for 20-30 years in retirement. Original Article #forme

Drawing up a will can be an emotionally taxing process. But it’s one that becomes especially difficult when a spouse is left to cope with the task after their partner passes away. Suddenly, what was once a joint decision made with a lifelong partner becomes a task a widow must face alone. Cinda J. Collins, senior vice president and financial advisor at RBC Wealth Management, knows this all too well. Despite having two years to prepare for her husband Bob’s passing when he was diagnosed with acute myeloid leukemia, Collins found the financial and emotional implications of settling his estate after he was gone were often overwhelming. Start With A Professionally Drafted Will To be as prepared as possible in the event of a spouse’s passing, Collins emphasizes the importance of speaking to an estate attorney as a couple, to ensure all affairs are in order. This way, if a spouse passes unexpectedly, the surviving partner will have less to tackle. “A widow gets bombarded with all the things she’ll have to do, so it’s essential to have everything as organized and up-to-date as possible,” Collins says. Johnston agrees. “No matter what your net worth … just to have a professionally drafted will is a big step in the right direction.” After contacting an estate attorney, a couple will likely be provided with an information packet outlining all the topics to consider and documents to bring to the initial meeting. “If they have life insurance, they should bring that policy and a net-worth statement helps a lot that tells how different properties are titled,” Collins says. In addition, couples with young children should consider guardianship before sitting down with an attorney. “It’s going to be more cost effective and make the meeting more meaningful,” Collins says. If a spouse dies without a will in place, the consequences can be far reaching. “You really do a disservice to your family. They are already grieving, and then everything is tied up in courts and someone else is interpreting what is going to happen to your family’s assets and it’s out of your hands,” Collins says. Remember, even with a will, the probate period can be arduous. While it varies from state to state, Johnson says the process for settling an estate once a will enters probate takes an average of six to nine months. Open A Bank Account in Your Name One of the biggest surprises for widows, says Collins, is that joint accounts are frozen when a spouse passes away. “It was a big issue for me personally because, like many couples, we had all of our investments, prepayments and home equity line of credit [paid out of] our joint account, which was frozen for 60 days.” Thankfully, Collins had a separate account in her own name that she used to handle immediate expenses. She also had the foresight to put her joint account in a trust before her husband’s passing, which stipulated in the event of his death, the assets would transfer to Collins, allowing her access to the funds within 24 hours. “If someone was strictly to have a bank account, they’re going to have to go somewhere else because the bank doesn’t free up those assets until they have a death certificate and the necessary documents to say who is going to be the owner of this money,” Collins says. Update Beneficiaries And Titles Of Ownership To avoid a long, and potentially expensive, probate process, it’s essential for widows to update beneficiaries in cases where the spouse was a named heir, says Johnston. They should also ensure the beneficiaries in the will match those listed on the assets themselves. For example, if the will states that the grandchild will inherit the funds from a life insurance policy, but the actual policy states that the child is the beneficiary, then it is the child and not the grandchild who will inherit the funds. Beneficiaries listed on assets such as insurance policies, 401(k)s and IRAs take precedence over designations in a will. “It’s a process. You don’t just have a beneficiary and never readdress it,” Collins says. “Whatever the beneficiary is with the institution where you have that account – that’s where it’s going and not where your estate documents may say. It can create cause for emotional duress and confusion for family members,” she warns. After the passing of a spouse, it’s also a good idea to ensure all titles for assets are updated, says Johnston. She recommends changing titles on anything with ownership attached, including bank accounts, cars and boats. The titles need to reflect the correct owner for sales, borrowing money against them and more. “So many times we see people get the documents in place, but don’t do the final step of retitling things and renaming beneficiaries,” Collins says. Have A Good Support System The complexities of estate planning make it important to rely on experts for help. Estate lawyers, accountants and financial advisors are invaluable resources who can help ensure the estate planning process runs smoothly. Just as it’s important to rely on experts for technical support in the estate planning process, Collins suggests a bereaved spouse also turn to a third-party expert—like a grief counselor or clergy—for emotional support. “Remember, family and friends are grieving too, so it’s good to have someone else to help you stay focused and organized,” says Collins. She also suggests that the recently bereaved may find it beneficial to bring a friend to any estate-related meetings. “In a state of grieving, it can be very easy to forget things. Bring someone along with you who can take notes and remind you of things you should be doing.” Original Article #Forme #Learn

If you aren't married and have no children, you may think you don't need an estate plan. But nothing could be further from the truth. Unlike with married couples, there could be no specific person who can legally make medical decisions for you should you become incapacitated. And if you were to die without an estate plan, your property would likely go through the probate process and potentially be awarded to a beneficiary you never would have chosen yourself. There are also tax minimization issues to consider. Why You Need a Will It's critical for single people to execute a will that specifies how and to whom their assets should be distributed when they die. Certain assets can pass to your intended recipient(s) through beneficiary designations (for example, on retirement plans and insurance policies). But without a will, many types of assets will pass through the laws of intestate succession. These include real estate, financial accounts and other property. Laws vary from state to state, but generally they provide for assets to go to a deceased person's spouse or children. If you're single with no children, however, these laws set out rules for distributing assets to your closest relatives, such as parents or siblings. Or, if you have no living relatives (or they can't be found), your assets may go to the state. By preparing a will, you can ensure that your assets are distributed according to your wishes, whether it's to family, friends or charitable organizations. Appointing Decision-Makers It's a good idea to sign a durable power of attorney that appoints someone you trust to manage your investments, pay your bills, file your tax returns and otherwise make financial decisions should you become incapacitated. In most states, a court will appoint someone to make these decisions on your behalf if you have no power of attorney. Not only will you have no say in who the court appoints, but the process can be costly and time consuming. You should also prepare a living will, a health care directive (also known as a medical power of attorney), or both to ensure that your wishes regarding medical care — particularly resuscitation and other lifesaving measures — are carried out in the event you're incapacitated. These documents can also appoint someone you trust to make medical decisions that aren't expressly addressed. The laws in some states allow a spouse, children or other "surrogates" to make these decisions. But if you don't have a suitable surrogate (or in states without such a law), medical decisions generally are left to the judgment of health care professionals or court-appointed guardians. Minimizing Gift and Estate Taxes When it comes to taxes, married couples have some big advantages. For example, they can opt to use their lifetime gift and estate exemptions, and to transfer an unlimited amount of property to each other without triggering immediate gift or estate tax liabilities. For single people with substantial assets, it's important to consider employing trusts and other estate planning techniques. An appropriate trust, for example, can help you limit, or at least defer, gift and estate taxes while you target other goals, such as building a charitable legacy. Life is Unpredictable Maybe you're young and healthy and think estate planning is something you can do later —possibly when you're married. Don't put it off. Life is unpredictable. With an estate plan, you can document your wishes and help ensure your assets go where you intend them to. Consult with an estate planning advisor as soon as possible. Why InHeirit If you’re single with no children, estate planning is essential to protect your assets, healthcare decisions, and legacy. InHeirit provides an easy, affordable way to ensure your wishes are legally documented and honored. With InHeirit, you can create a will, establish powers of attorney for healthcare and finances, and avoid the risk of courts or distant relatives deciding your future. You can also set up trusts to minimize taxes and direct your assets to friends, charities, or causes you care about. InHeirit simplifies the entire process so you stay in control, ensuring your estate goes exactly where you want—even without a traditional family structure. Original Article #Forme #learn