Now that people are living longer, it's becoming more and more common for widowed or divorced seniors to find love a second time. In terms of estate planning, marriage in your golden years is quite different from the marriage of two young people just starting out.
Marrying someone creates a legal obligation to that person. All of a sudden, that person you've been dating has a right to some portion of your estate. This is why marriage automatically revokes whatever Will you had in place before you were married. Now you can't leave that person out of your Will without a risk of it being contested.
Most seniors in this position have adult children from a first marriage. If the senior did not remarry, the children would normally expect that the estate that their parents built up together over the years would one day be passed down to them. Now they will worry that when the senior remarries, the estate will pass to the new spouse rather than to the children.
This is not just the children's concern. Most seniors that I meet who are considering remarrying are quite aware of this issue. They ask me how they can ensure that their estates pass to their children and not their new spouse.
As you can see, now the senior is stuck in the middle between the need to include the new spouse in the Will and the desire to include the children in the Will. More than anything, they want to prevent disputes. It's a balancing act.
Remember that for married people, estate planning means more than just the Will. For example, in some provinces (including Alberta), married people have Dower rights, which includes the right to live in the house they lived in with their spouse for the rest of their lives. Also, most pension laws automatically name a spouse as the recipient of any benefit payable.
In addition, most spouses will name each other as the beneficiary on their RRIF or RRSP to take advantage of tax rollover provisions that are not usually available otherwise.
Unlike people who marry very young, seniors of both genders often already have some wealth. They have often received property through a divorce, or when they were widowed. They come into a marriage already owning a home and sometimes significant investments. This means that they are sometimes not as dependent on the other spouse for financial support as they might have been years ago.
You also have to consider mental incapacity. Who do you name as the decision-maker on your medical directive when you are newly married but have adult children? What are the chances that if you name one person, someone else will resent it or try to intefere?
There is certainly a lot to think about. There are a couple of approaches you can take, depending on the circumstances.
Where both of the seniors who are getting married have some wealth of their own, the decisions are somewhat easier. The new Will that will be made after the wedding can leave the estate to the person's own children from an earlier marriage, so long as it can be established that the spouse is adequately provided for. The Wills should contain a statement to the effect that the spouse is independently adequately wealthy and therefore does not need support from the estate. If the spouse will be getting anything not covered by the Will (such as RRIF, pension, joint property, etc) then that should be mentioned as well.
This doesn't mean that every spouse with his or her own money should automatically be left out of the Will, as that can be very risky, but it does mean that you are more likely to be able to make the case that the spouse is not in financial need.
It's not always the case that both spouses have their own money. Sometimes one senior can be in a much better financial position than the other. It's pretty hard for the one with money to leave the other out of the Will and claim that no support should be given.
A solution that can work well here is a spousal trust. This involves the spouse with money giving all of the estate - or a significant portion of it - to a trustee to look after for the lifetime of the other spouse. When the spouse with money passes away, the surviving spouse will have something to live on for the rest of his or her life, but will never own the assets in the estate. Usually this is set up so that when the surviving spouse dies too, the assets held in trust pass to the children of the spouse with money. That way, all obligations are met because the children of the first marriage still receive all of the assets eventually.
The unfortunate side of all of this is that seniors often think that if they don't marry and simply live together, they by-pass the obligation to the other person. That is simply not the case. In Alberta, if you live with someone for three years, they automatically have the same rights as a legal spouse for the purpose of inheriting. And because people in this situation don't realize they have the obligation to support the common law spouse, they probably never did make a new Will. Therefore they end up passing away with no Will, a common law spouse, and a group of adult children who are furious that Mom or Dad didn't take care of making a Will that would protect them.
Marrying someone creates a legal obligation to that person. All of a sudden, that person you've been dating has a right to some portion of your estate. This is why marriage automatically revokes whatever Will you had in place before you were married. Now you can't leave that person out of your Will without a risk of it being contested.
Most seniors in this position have adult children from a first marriage. If the senior did not remarry, the children would normally expect that the estate that their parents built up together over the years would one day be passed down to them. Now they will worry that when the senior remarries, the estate will pass to the new spouse rather than to the children.
This is not just the children's concern. Most seniors that I meet who are considering remarrying are quite aware of this issue. They ask me how they can ensure that their estates pass to their children and not their new spouse.
As you can see, now the senior is stuck in the middle between the need to include the new spouse in the Will and the desire to include the children in the Will. More than anything, they want to prevent disputes. It's a balancing act.
Remember that for married people, estate planning means more than just the Will. For example, in some provinces (including Alberta), married people have Dower rights, which includes the right to live in the house they lived in with their spouse for the rest of their lives. Also, most pension laws automatically name a spouse as the recipient of any benefit payable.
In addition, most spouses will name each other as the beneficiary on their RRIF or RRSP to take advantage of tax rollover provisions that are not usually available otherwise.
Unlike people who marry very young, seniors of both genders often already have some wealth. They have often received property through a divorce, or when they were widowed. They come into a marriage already owning a home and sometimes significant investments. This means that they are sometimes not as dependent on the other spouse for financial support as they might have been years ago.
You also have to consider mental incapacity. Who do you name as the decision-maker on your medical directive when you are newly married but have adult children? What are the chances that if you name one person, someone else will resent it or try to intefere?
There is certainly a lot to think about. There are a couple of approaches you can take, depending on the circumstances.
Where both of the seniors who are getting married have some wealth of their own, the decisions are somewhat easier. The new Will that will be made after the wedding can leave the estate to the person's own children from an earlier marriage, so long as it can be established that the spouse is adequately provided for. The Wills should contain a statement to the effect that the spouse is independently adequately wealthy and therefore does not need support from the estate. If the spouse will be getting anything not covered by the Will (such as RRIF, pension, joint property, etc) then that should be mentioned as well.
This doesn't mean that every spouse with his or her own money should automatically be left out of the Will, as that can be very risky, but it does mean that you are more likely to be able to make the case that the spouse is not in financial need.
It's not always the case that both spouses have their own money. Sometimes one senior can be in a much better financial position than the other. It's pretty hard for the one with money to leave the other out of the Will and claim that no support should be given.
A solution that can work well here is a spousal trust. This involves the spouse with money giving all of the estate - or a significant portion of it - to a trustee to look after for the lifetime of the other spouse. When the spouse with money passes away, the surviving spouse will have something to live on for the rest of his or her life, but will never own the assets in the estate. Usually this is set up so that when the surviving spouse dies too, the assets held in trust pass to the children of the spouse with money. That way, all obligations are met because the children of the first marriage still receive all of the assets eventually.
The unfortunate side of all of this is that seniors often think that if they don't marry and simply live together, they by-pass the obligation to the other person. That is simply not the case. In Alberta, if you live with someone for three years, they automatically have the same rights as a legal spouse for the purpose of inheriting. And because people in this situation don't realize they have the obligation to support the common law spouse, they probably never did make a new Will. Therefore they end up passing away with no Will, a common law spouse, and a group of adult children who are furious that Mom or Dad didn't take care of making a Will that would protect them.
Pre-nuptial agreements are also a very good idea for second marriages. This is not so much to exclude a spouse from getting anything, but to state your goals for your children , define the property that each spouse brought into the marriage, and clarify your understanding of what will happen when one spouse passes away.
If you are a senior contemplating marriage, please talk to an estate planning lawyer about how it will affect your future finances.
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