Money Radio/Financial News Radio – October 21, 2015

The main topic of the broadcast was estate planning with respect to a second or third marriage. What type of planning should be done prior to the marriage? What type of planning can be done after the marriage if you failed to plan prior to the marriage? To listen to the entire broadcast, click here.

First, think about a prenuptial agreement and get an estate planning attorney involved in the prenuptial. Certain estate planning concepts that need to be in a prenuptial include:

  • Agreement that earnings from a job or W-2 wages remain sole and separate property.
  • Spouse agrees to "consent" to a beneficiary designation other than the spouse for all pension benefits. Otherwise, federal law requires the pension to be designated to the spouse, even if it was earned prior to the marriage.
  • Who's house you will keep and occupy and how each spouse will contribute to the expenses of the house, including the mortgage. Also, a statement that if community funds are paid to reduce the mortgage, whether or not the house remains the sole and separate property.
  • Whether or not you will file a joint income tax return, and how you prorate the tax liability between the spouses.
  • What your spouse would receive from your estate in the event of death. Here you should be much more liberal than what a spouse would get in the event of divorce. There are also certain tax advantages of using a "QTIP Trust" to achieve overall estate tax savings to your kids.

Second, think about a QTIP Trust. This is a trust specifically designed for second marriages. It walks the line between providing an income stream to your spouse after your death and then the remainder of the assets after her death passes to your kids. It is designed to qualify for the marital deduction, so no estate taxes at the first death.

Third, get a good understanding as to which assets are going to be community property, which assets remain sole and separate property, and different ways to protect the sole and separate from being "transmuted" to community property.