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Accidental Disinheritance Common In Second Marriages
Jan L. Warner & Jan Collins

Question: My wife and I married two years ago, each for the second time after the deaths of our spouses. I have three grown children, and she has two. Instead of going through the hassle of a premarital agreement, we were told by our lawyer that we could protect each other and our respective children through our wills. Each of us would sign a will which stating that at the death of the first of us, all assets will go to the other and, at the death of the second, half of the assets will go to my children and half to hers. If we die simultaneously, half the assets will go to my children and half to hers. We each sold our homes and are purchasing a new home jointly so the survivor can live there until he or she dies. We have no debt. This process was much less expensive than a premarital agreement. Do you think this plan will carry out our intentions?

Answer: No. First, wills can be changed for so long as a person has the legal capacity to sign one. This means that if you predecease your wife and she either remarries and changes her will or she changes her will after your death, your children will be left out in the cold. Second, if you predecease your wife and she later needs long-term care, all assets could be used up paying for her care. Third, if you predecease your wife and she gives her children her power of attorney with gifting provisions, upon her incapacity, all assets could be gifted to her children, but not to yours. Fourth, the ultimate ownership of some assets -- like IRA's, annuities, life insurance, and retirement plans, are not governed by your wills, but by beneficiary designations. If you make your wife the beneficiary of these types of non-probate assets and predecease her, she can - and probably will - change the beneficiaries of her plans to her children.

Fifth, the manner in which your new home is titled is also problematical. When you each sold your former residences and invested the equities in the new home, it appears that the new residence was titled jointly with right of survivorship. This means that at the first death, the surviving spouse receives title to the house automatically. Since wills can be changed, if you predecease your wife and she changes her will, your children will be left out in the cold. The intended result with the house could have been avoided by each of you retaining a life estate in the home and leaving the half the remainder interest to your three children and half to her two children. The drawbacks: (1) by vesting remainder interests in the children, you each would be making a present gift and, depending on the value, may need to file gift tax returns, and (2) if either or both of you need to mortgage the property in the future or sell it, you will need the consent of all children - and if any die, you may be dealing with your minor grandchildren.

Bottom Line: Accidental disinheritance is more common that you might think. It is not a good idea to choose a course of action that will not carry our your intentions. So always think through your options. The cost of a premarital agreement or a plan by which your assets will be kept separate and your wills will contain appropriate trusts is much less than the cost to disinherited children. Understand your options when you plan your estate, including the manner in which property is titled. Although you may think your will or a trust will determine how an asset passes at your death, this is sometimes not the case. The way in which property is titled determines how a property passes, and sometimes this means that the intent of your will or trust will be frustrated.



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