Second Marriages and Risks to the Estate

I'm attaching a link to a really good article about what can happen when a person with children from a first marriage decides to marry again. What I like about the article is that they use the example of a fictional couple and show what could happen in various circumstances. It's an eye-opener. Click on the link below to read this article from lawyers in Ontario.

Second Marriages and Risks to the Estate

Getting married for the second time around, and your finances

If you are getting married for the second (or more) time, there are quite a few financial items that deserve your attention. Not looking after these will almost certainly result in problems and losses, perhaps on divorce but more likely after one of you passes away. Click  here to read a new article from http://www.fabafterfifty.co.uk/ that will give  you a run-down on what to look for.

Experts say people need marriage contracts

While this article from the Financial Post isn't just about estate planning, it certainly touches on it. Marriage contracts,  or pre-nuptial agreements as they are more widely known, are becoming more common, particularly for second marriages. Click here to read the article.

Getting married later in life? Five things you need to think about

A marriage between two people who already have children from previous relationships and who have accumulated some assets is not simple. Some focused planning can ensure that financial matters run smoothly, including your estates after your death. Before tying the knot later in life, read this article from http://www.advisor.ca/ for a short but essential list of things to do first. Click here to read the article.

Estate planning a must when marrying later in life

I agree with the premise of this article from http://www.about.com/ , that it's essential for those marrying later in life to have a strong, comprehensive estate plan in place. The article I'm attaching is American, but the concepts it mentions apply in Canada as well. Click here to read it.

The second concept mentioned in the article, that you can't disinherit a spouse without his or her consent, works a little differently in Canada. Generally speaking though, there is either a statutory obligation to leave some or all of the estate to your spouse, or an automatic right for a spouse to contest a will which disinherits him or her. Nobody should be trying to prepare a will that disinherits a spouse without consulting an estate planning lawyer first.

Marriage the second (plus) time around

This article by lawyer Kyle Krull talks briefly about something you should consider when you re-marry: the effect on your estate planning. Click here to read the article.

All the right heirs

This post from Toronto Estate Law blog summarizes a report that talks about the issues involved in determining who are the correct beneficiaries of an estate. It's pretty interesting stuff, particularly when you look at the percentage of estates in which there appears to be an unknown beneficiary. Click here to read the article.

I'm not surprised to see that so many executors have trouble figuring out who is supposed to be a beneficiary and who is not. Blended families, adoptions, second marriages, estranged siblings... they all make it tough to know how to apply the law.

Alberta's new Wills and Succession Act - part 1

There are big changes coming to wills and estates law in Alberta. Our new Wills and Succession Act (WSA)is expected to take effect in January 2012. Over the next few weeks I'll write a series of blog posts to let you know what's coming. When you read the posts, think about whether the changes could affect you, and perhaps talk to your wills lawyer to find out for sure.

The first change that I'll tell you about has to do with a spouse having possession of a deceased person's home. In Alberta we have the Dower Act, which talks about the situation where a man and woman are legally married and the house is only in the name of one of them. If the one who owns the house dies, the other spouse has a right to live in the house for the rest of his or her life. That hasn't changed. But what about common law couples? The Dower Act doesn't apply to them.

The new WSA talks about that, which is completely new to Alberta law. It says that the spouse can stay in the house for at least 90 days after the death of the spouse who owned the house. The situation must be that:
- the deceased spouse is the one who owned the house
- it can be a house, condo, apartment, mobile home, etc
- the couple must have been Adult Interdependent Partners (Alberta's equivalent of common law spouses, and usually means they must have lived together for at least 3 years)
- the couple must have lived in the home as their family home

This isn't likely to be a problem if the deceased spouse made a will and left the house to his or her surviving spouse. But it's important if there isn't a will.

It's also important if the spouse who owned the house was in a second marriage. Often, in second marriages the spouse wants to leave his or her estate (including the house) to the children of the first marriage. If there was no right to stay in the house for a period of time, which until the new law comes into force is the case, then the surviving spouse has to pack up and get out ASAP so that the children can inherit.

Having observed first hand through my work how cold the children of a first marriage can be towards a step-parent, I'm in favour of this change. It will give a least a short breather for the surviving spouse to make plans to live elsewhere.

When my parent marries later in life, what are my rights?

Your 65-year-old Mom tells you that she is getting re-married. You congratulate her, mark the date on your calendar, and... research your legal rights?

That seems to be what's on the minds of many whose parent re-marries later in life. I notice that when this topic is raised, the question is not "do I have any rights?", but "what are my rights?". In other words, there is already an assumption out there that an adult child in this situation has some say in the matter.

Let's put all the cards on the table here. When I'm asked this question, the person is really asking me how they can prevent Mom or Dad's new spouse from getting his or her hands on the money and property the child was expecting to inherit. The concern is for the money.

I find this kind of thinking dangerous. It's the same sense of entitlement that causes perfectly normal adult children to help themselves to Mom or Dad's money using a Power of Attorney or joint bank account. The rationalization in that case is that one day it will belong to the child anyway so why can't the child just take it early?

As long as your parent has mental capacity, he or she can marry the person they choose, can spend their money how they choose, and can change their will if they choose. That's not up to you, like it or not. You can't insist that your parent share their money with you now, or make a new will leaving everything to you or sign a pre-nuptial agreement. Parents are adults.

It's a different story, of course, if your parent has lost mental capacity and is being taken advantage of by what is often called a "recent friend". Obviously all of us have the obligation to protect our aging parents from predators. If you've talked to your parent twice a week for the last 10 years and you've never heard of this new person, you might rightfully be suspicious.If money was disappearing and your parent didn't seem to understand where it went, or someone was threatening or bullying your parent into giving them money, you'd have an obligation to step in and protect your parent.

But as I said, the question asked is never about the child's obligations; it's always about their rights.

Your rights are to attend the wedding (if invited), bring a gift and to wish your Mom or Dad well.

5 reasons to get married over 50

This article from About.com Senior Living lists and discusses five good reasons to get married when you and your spouse-to-be are over 50. Click here to read it. It also contains several links that you might find interesting.

If I die and my spouse remarries, who inherits the money?

This is a common question, and a real worry for some people. The question is most often asked by the parents of young children, though it's applicable to the parents of children of any age. The fear is that a married person will leave everything to his or her spouse, then the spouse will get married again and leave everything to that spouse. This would leave the children out in the cold.

For example, Bill and Mary are married. They make Wills leaving everything to each other, and when both are gone, divided among their kids. Bill dies. Mary inherits everything. Mary re-marries to Dan, and when she dies she leaves everything to Dan. It's possible - and believe me, it happens - that Dan's children could eventually get everything while Bill and Mary's children get nothing.

Why would someone in Mary's position leave everything to Dan, you ask? There are plenty of reasons. Mary might not realize that the Will she made while married to Bill was revoked by her remarriage and thinks she still has a Will leaving everything to her kids. Perhaps she meant to make a new Will "one day" and never got around to it. Maybe she thinks that Dan legally has to share her estate with her children. It's easy to misinterpret the law.

It could be that Mary trusts Dan to "do the right thing" by her children. One of the worst Wills I've ever seen was a one-paragraph Will done by a woman in her second marriage, who had an adult son by her first marriage. All her Will said was that she wasn't leaving anything directly to her son because she was sure her husband would look after him. Well, she was wrong. The husband, who had an estate of nearly $6,000,000, did nothing for the son. The son literally lived on the street after his mother passed away.

So what can you do about this to prevent it happening to your kids?

The following ideas are not things that you should put into effect without talking to your lawyer, who can help you sort out the legal and tax implications of your plans:
1.  Make a Will.
2.  Give part of your estate to your spouse and leave the other part of it directly to the children, even if this means you have to hold the kids' shares in trust for them for a while.
3.  Leave your estate in a spousal trust so that your spouse can use what is needed for his or her lifetime, but the estate in general will be held for the children after your spouse dies.
4.  Give your children some money while you're alive (assuming of course that you don't need that money to live on), perhaps in the form of a down payment on a house for them.
5.  If you set up a spousal trust or children's trust, appoint a trustee who is not your spouse or children.
6.  If you have an RESP for your children, appoint a successor owner of the plan.
7.  Make mutual Wills for you and your spouse, meaning that the Wills include a contract that neither of you will change your Wills after the other one dies. These are pretty rare and can cause a lot of other problems, but ask your lawyer about it if it interests you. (By the way, Wills made by a husband and wife that are the same except that they mirror each other's names are NOT mutual Wills. I've seen them called mutual Wills many times, even by those who should know better, but they aren't. With a Will like that, your spouse can make a new Will after you die).

Some of you are reading this post and are horrified. You're thinking that your spouse would never intentionally leave out the children, and youre probably right. But assuming you die later in life, and leave your spouse widowed, your spouse wouldn't be the first trusting senior to be taken advantage of.

Update your will in your 40s and 50s

I have another article in today's Globe and Mail. It's a natural follow-up to last week's article, which talked about starting your estate planning in your 20s and 30s. Today's article discusses keeping up with the changes in your life - personal, financial, and business - and making sure that your estate plan reflects those changes. The title in the Globe refers to "30s and 40s" but the article is about "40s and 50s". Click here to read it. Hope you enjoy it!

Till Death Do Us Part, Quickly - Then I Inherit

Here's a financial path I hadn't considered - that of predatory marriage partner. Apparently marrying an older, wealthier person is on the upswing as a means to achieving financial ends. This arrangement has always existed, of course, but some say its prevalence is growing. Nah, I think I'll stick with practicing law.

Click here to read the article from All About Estates.

Something to Consider if You Are Cohabiting

The article attached talks about the position one common law spouse can be left in when the other passes away. In particular, it talks about older individuals who are in second relationships. The situation depends, of course, on the laws in place in each location, but this article does a good job of illustrating what can happen. In Alberta, common law relationships are covered by the Adult Interdependent Relationships Act, and so include both same-sex and opposite-sex relationships. Click the link below to read this article from Boomer-Living:

Something to Consider if You Are Cohabiting

Remarriage – Law and Advice

This is an entertaining and informative article I found about second marriages. Click on the link below to read it.

Remarriage – Law and Advice

What do people in a second marriage have to consider when making a Will?

Because I get so many questions about second marriages, and because it's so tricky to get estate planning right for individuals in this situation, I thought I'd talk a bit about some of the issues that specifically apply to people in second marriages. I'm not going to cover issues that apply to ALL married individuals, but only those that crop up with second or subsequent marriages.

Firstly, in some provinces, getting married automatically revokes an existing Will. If you made a Will after your divorce to look after your children, that Will was revoked when you re-married.

You'll realize when you start discussing your estate planning that you're going to have to carry out a balancing act between the various people in your life. You owe an obligation of financial support to certain people, including your spouse (married spouses in all provinces, common law spouses only in certain provinces), your minor children, and your children who are adults but who cannot earn a living due to a disability. This gets tricky for people in subsequent marriages because they often have two sets of children - one from each marriage.

I talked a bit more about that balancing act in a post here.

There are some other issues as well. For example, have you adopted your step-children? Typically people going into a second marriage only adopt their step-children if the children are quite young, but that varies. Understand that for the purposes of estate planning, non-adopted step-children have quite a different legal status than adopted step-children. If you don't make a Will at all, or the Will you have made is found to be invalid, this will make a huge difference to their rights.

If you do not make a valid Will, and your estate is to be divided among your spouse and your children, the word "children" here only includes blood or adopted children, and not step-children.

Also consider the beneficiary designations you've made on your life insurance policies and RRSPs. If you bought those items during your previous marriage, they probably designate your ex-spouse as the beneficiary. Perhaps that's what you still want, or what you are obligated to do as a result of your divorce settlement. In that case you don't have to change anything.

Most people, however, want to update their beneficiary designations to name their current spouse or perhaps the children. Do not assume that your divorce decree or your separation agreement changes those designations, because they do not. In some cases (a minority) the divorce or separation paperwork will specifically refer to a certain policy or account and talk about how it's to be dealt with; most do not. The generic wording of releasing all claims against the other's estate does NOT change beneficiary designations. You'll have to do that yourself if you want to change it.

Guardianship of minor children can also be an issue. You may have two sets of minor children who will likely have two different guardians. When you pass away, the children's other biological parent automatically has a right to custody, so you have to word any guardianship appointments for the children of your first marriage properly. I talked more about this in a post here.

For some people, leaving money in trust for the children of a previous marriage is an issue because they don't want their ex-spouse to have access to that money.

Finally, think about how the Dower Act might affect you. Most provinces in Canada have abolished the Dower Act but it's still in effect (for now, at least) in Alberta. This law gives a married (but not common law) spouse a right to live in the matrimonial home until he or she dies, moves out permanently or signs away that right. This can cause complications for someone with a current spouse who is trying to pass on property to children of a previous marriage.

If you are in, or soon to be in, a second (or subsequent) marriage, I strongly urge you to talk to an experienced estate planning lawyer to have an appropriate Will made. It's not a simple document but if properly done it will definitely save money and headaches for the people left behind after you pass away.

How does getting married later in life affect estate planning?

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.

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.

Second marriages can cause estate problems

The latest Calgary Real Estate News issue is carrying my article called "Second Marriages Can Cause Estate Problems". To read it, click on the link below.

http://www.cren.ca/content_view?CONTENT_ID=4115&MODE=AUTHOR&AUTHOR_ID=126&AUTHOR_NAME=Lynne+Butler+

Dower Act can change your plans

Yesterday I met with a client who was in his second marriage. Both he and his wife had children from their first marriages. They agreed verbally that each of them would leave their estates to their respective children.

Unfortunately we ran into a snag that might sound familiar to many people because the situation is not unusual. The client and his wife live in a home that is in his name only. They've always kept it in his name only because their plan is that when the husband passes away, the house will go to his children. The snag is the Dower Act of Alberta.

The Dower Act gives the wife the right to live in the house for the rest of her life. This right arises because they are legally married (the same right does not apply to common law couples) and they live in the house as their "matrimonial home". The husband suggested that in his Will, he would leave the house directly to his kids, thereby avoiding the Dower Act, but that would be ineffective. If he does leave it to his kids, they will only receive the property after her Dower Act rights expire (i.e. when she passes away). Until then they will have to wait.

A person is able to waive his or her rights under the Dower Act. Therefore if this couple really has agreed to the division of property that the client has described, then it would probably be a good idea for the wife to sign a waiver of her rights. In fact, the Dower Act has a regulation that sets out a form for doing so. If a waiver were to be signed, the husband could then make a Will leaving the house to his children.

When I advised the client of his position, he wasn't happy. He hadn't realized there would be a problem. However, I thought it was fortunate that he found out now that his plans wouldn't work, rather than his children finding out after he had passed away.