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Saying “I Do” Again in Your Golden Years

Wedding older coupleA late-in-life remarriage can get extremely complicated, says New Hampshire Magazine in “Navigating Late-Life Remarriage.” This is especially true if you don’t know your legal rights and responsibilities or fail to address money matters up front.
While death and the likelihood that one spouse will outlive the other is inevitable, another important fact is that the divorce rate among those who remarry later in life years is 60%. This is much higher than the rate of any other segment of the population. Some experts think that number may go even higher.
Important considerations in senior marriages are pre-nuptial and post-nuptial agreements. These agreements stipulate rights and obligations in the event of separation or divorce. Although presumed to be valid, proper drafting is essential. Estate planning is critical for those who remarry and have additional issues of blending families and assets. If one or both partners have children and former spouses, a trip to the offices of a qualified estate planning attorney is paramount before the big day.
As you make the appointment with your attorney, here are some of the basics to digest:
· Estate planning documents should be updated to reflect your new marital status and your current wishes;
· You don’t need your spouse’s consent to name someone other than him or her as the beneficiary of your IRAs;
· Your spouse will have rights and benefits to some of your qualified retirement plans, like 401(k)s and pensions;
· Your spouse may waive any provision made for him or her in the deceased spouse’s will and instead take a fraction of the estate, typically one-third to half, depending the number of people in the family;
· If you’re widowed or divorced but then remarry before age 60, Social Security benefits that you collect from your former spouse will be impacted;
· You are responsible for the costs of medical care and long-term care for your new spouse; and
· If you have children in college receiving financial aid, adding your new spouse’s salary to your family income might decrease the amount of aid that your child receives.
As you can see, this gets complex rather quickly, and you can never be too careful or too well-prepared. It is essential to work with an experienced estate planning attorney.
Reference: New Hampshire Magazine (December 2016) “Navigating Late-Life Remarriage”

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The Rules for 401(k)s When You Die

401k piggy bankFederal law is pretty clear cut regarding what happens to company retirement plan assets if a married participant dies on the job. In that scenario, the survivor gets 100% of the account—provided that person hasn’t specifically waived the right.
When a worker takes a retirement plan payout as an annuity, he or she must select a plan that will continue lifetime payments to the surviving spouse equal to at least 50% of the original benefit amount. A spouse can also waive that right, but it must be in writing.
Kiplinger’s August 2016 article, “What Happens to Your 401(k) When You Die–Like It or Not,” reports that when President Reagan signed that rule into law back in 1984, he proudly said, “no longer will one member of a married couple be able to sign away survivor benefits for the other.”
The protection for a surviving spouse is so powerful that it’s superior to properly named beneficiaries. Further, this rule can’t be unset by a pre- or post-nuptial agreement where a spouse waives the death benefit. A pre-nup doesn’t do it since a spouse and not an engaged individual must waive the benefit, and a post-nup has no authority—unless the spouse actually signs a written waiver. Note that singles can designate whomever they choose as beneficiary.
While there are clear rules for the protection for a survivor’s rights, it’s a bit cloudier while the 401(k) owner is alive. There’s actually a loophole to the tune of $1 million in a lump-sum distribution. When a married worker leaves a job, most 401(k) plans permit the employee to roll over the balance to an IRA without notifying the spouse.
Once the money is in the IRA, the death benefit protection is gone.
In most states, the IRA owner can name anyone as beneficiary of the account. However, in community property states, you may need spousal consent to name someone other than your spouse as beneficiary of more than 50% of the account.
There are, however, some plans that require spousal consent for a distribution, such as when the default benefit under the plan is a joint annuity with the participant’s spouse. Otherwise, to claim benefits, such as a lump-sum distribution to be rolled into an IRA, the spouse must agree—it’s pretty rare among 401(k) plans. Plans that require a 100% death benefit for a spouse typically don’t demand spousal consent for a lump-sum payout.
It’s very important to understand the rules—and not just those of your own retirement plan but also of those that govern the plan that covers your spouse.
Reference: Kiplinger’s (August 2016) “What Happens to Your 401(k) When You Die – Like It or Not”

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Fighting Begins in the Robin Williams Estate

Fight over moneyThe comedian Robin Williams hadn't been deceased for long when a fight erupted over some of his belongings. Williams' third wife and his three children from a previous marriage landed in court with a dispute over personal items, including Williams' watches. When assets are being passed on to children from a prior marriage, trouble can quickly ensue. Having a clear will and a sound trust can help ease tensions. But experts are advising people who remarry to have even stronger asset defenses—prenups and even postnups that are highly detailed and clearly laid out. The message from the experts is simple: You can never have too many documents backing up your intentions.

"The mess comes when you don't have proper estate planning," according to an attorney interviewed in a recent article titled Remarrying? Shower kids with love, and a good prenup from CNBC. An important tool in that toolbox, he says, is a prenup. A prenup details how assets would be split up if the marriage fails or a spouse dies. A spouse who wants to protect assets in a second marriage should also talk to an experienced estate planning attorney about trusts.

One of the best features of a prenup is that it can protect nearly every kind of asset an individual may want to pass along—this includes art collections, cash, and the family business. Without a prenup, it’s easier for a spouse to obtain some unintended part of the estate if you die. A prenup should be airtight to avoid legal issues. Although Robin Williams had a well-thought-out estate plan when he passed, which included a prenup and a trust for his children, some of his personal items were left out of the documents. This is causing a fight between his spouse and his children.

Documenting every asset is necessary. Lists of paintings owned before a second marriage can be kept in multiple places, which helps you show evidence of your intentions … and the more detail, the better! Once a prenup is signed, it’s nearly unbreakable and is typically accepted by the courts.

The original articlegives us some guidelines to keep in mind and to discuss with your attorney:

  1. Both you and your spouse should understand the prenup, and both should be represented by attorneys.
  2. Negotiate and sign the prenup prior to your wedding. A common mistake is signing the prenup the day of the wedding!
  3. After you're married, be careful not to commingle all assets because the source of funds—like joint or separate accounts—used to buy an asset will decided who owns it.
  4. The more communication, the less misunderstanding. Conduct a family meeting and discuss your intentions for your estate.

Read about more tips in the article and talk to your estate planning attorney sooner to help avoid costly court battles later.

For more information about estate planning, please visit my estate planning website.

Reference: CNBC (February 12, 2015) Remarrying? Shower kids with love, and a good prenup

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