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Second Marriage? Don't forget the Trust and the Pre-Nup and the Retirement Plan Waiver

Second marriages create special estate planning needs.

Adults entering second marriages, but having children from a first marriage, may want to have a pre-nuptial agreement, a trust, and a qualified retirement plan waiver.

Relying on a trust alone may not be sufficient. And, the only way that a new spouse can be waived as the beneficiary of a “qualified retirement plan” is if the new spouse does the waiving. 

With a pre-nup, the new spouse contractually agrees that he/she has no claim on the assets of the person that he/she is marrying. In Minnesota, the assets held by each party before marriage are typically spelled out as an exhibit to the pre-nup document.

Without a pre-nup, the new spouse could challenge a trust under Minnesota’s "elective share” law. Under that law, when one spouse dies, the other spouse has the “right of election” to claim various percentages of the deceased spouse’s estate. The percentage increases with the number of years that the two were married, and tops out at 50% at 15 years of marriage in Minnesota. 

A pre-nup and trust should be signed before the couple marries. In Minnesota, it is best if there is a gap in time between the signing of the pre-nup and the wedding. If the signing occurs too close to the wedding, the plan may fail under charges of duress. (Parties who are already married may sign a postnuptial agreement, but the spouse proposing the post-nup has a lesser bargaining position, and additional legal requirements apply.)

On the other hand, a retirement plan waiver must be signed after the marriage takes place. The waiver requirement is not avoided by naming a trust as the beneficiary of your assets.  Nor will a pre-nup override the waiver requirement.

Also exercise caution with jointly held property. If you die before your second spouse does, your second spouse will have sole ownership of any jointly held assets upon your death. As a result, your children from your first marriage may lose out when it comes to inheriting jointly held assets.  How? If the second spouse desires to do so, he or she can leave this asset to his or her friends or relatives and cut your children out entirely. Alternatively, if you title assets in the name of your trust, you can ensure that your children from your first marriage will ultimately own your trust assets while providing for your second spouse’s support in the meantime.

©2012, 2013 Wittenburg Law Office, PLLC. All rights reserved.

Disclaimer: This Blog is for informational purposes only and is not to be construed as legal advice. If you have questions, please seek the advice of an attorney. An attorney-client relationship is not formed by reading this Blog. If you are interested in Wittenburg Law’s representation of you, you must contact Wittenburg Law for a determination of whether your matter is one for which Wittenburg Law is willing and able to accept representation of you.

Bonnie Wittenburg, Wittenburg Law Office, PLLC, Minnetonka, 952-649-9771 bonnie@bwittenburglaw.com  www.bwittenburglaw.com



 

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