Reader Mail: Will Children From Previous Marriage Inherit Joint Property With Current Spouse?
Hey Ginger,
I’m getting married in April of 2009 and have some concerns as this will be my second marriage making this a blended family. I along with my fiance have children from previous marriages/relationships and I am concerned about whether or not my children will be able to inherit joint property that I own with my fiance, soon to be husband in the unfortunate event of our demise.
Disclaimer: I am not a lawyer and this should not be misconstrued as legal advice. I did however check with an attorney friend who had the following to say:
[Her situation will be determined by...] what state she is in and what type of joint ownership (i.e., joint property with rights of survivorship). If she and her husband/husband to be own property, she needs to clearly indicate what disposition of property she desires.
Kiplinger Magazine also had the following to say about blended family finances:
DRAW UP A PRENUP
….a prenup can help you sort out your finances regardless of whether your marriage ends in divorce after six months or with the death of one spouse after a long, happy union. Not only does a prenup spell out what each of you owns and can expect if you end up single again, but it also lets one spouse waive rights to any property — say, a family business or an investment account — that the other wants to preserve for his or her kids. Without a prenup, state property-division law bestows a share of the marital property on the other spouse, no matter how the marriage ends.
If you decide to go the prenup route, you’ll each need a lawyer to represent your interests, for which you’ll pay a total of $2,500 to $10,000, depending on where you live and how complicated your affairs are. Sign off on the prenup well before the wedding. Otherwise, a judge might conclude that one of you was pressured and refuse to honor it.
ORGANIZE ACCOUNTS
Never got around to discussing the p word? You could always ask your spouse to sign a postmarital agreement, although you each have less leverage with the other once you have tied the knot. If you don’t want to put the plan on paper at all, you may be able to preserve assets for yourself or your children by keeping the property you acquired before the wedding separate from the marital mix. The definition of “separate,” however, depends on state law and maybe the courts. Research how your state interprets separate and commingled property, or check with a lawyer.
Many blended families establish a joint household account and joint savings for their life together and keep other accounts separate. The Sassamans started out with separate bank accounts but eventually concluded that the process was unwieldy. “If she needed to get more things, I’d have to write a check from my account to her account,” says Dave. Eventually, they created a single fund for household expenses. “Now we just talk about what needs to be paid,” he says.
How you keep your accounts can affect your financial obligations. In some states, a stepparent who significantly contributes to the support of stepchildren — and who lets the parent who is legally responsible for support off the hook — can become responsible for supporting the stepchildren even if the marriage ends. That scenario won’t happen if the biological parent pays major child expenses from a separate account.
One more argument for stand-alone accounts: better access to college financial aid. You must include the stepparent’s income and assets on the financial-aid application (assuming you’re the parent who applies), but you may be able to persuade a college later to remove the stepparent’s separate assets from the financial-aid equation, says Deborah Fox, of Fox College Funding, in San Diego. You’ll have to wait until you receive your financial-aid statement and make your case in an appeal. (For more about financial aid, see the box on page 84.)
UPDATE THE ESTATE PLAN
Whether you anticipate inheritance issues in a prenup or worry about them later, at some point you must face the question of who inherits what. Estate planning is the “big hairy issue” for blended families, says Maurer, especially when grown children from one marriage and young children from the new one are involved. You may have accumulated a lot of equity in your house, for instance, and want that money to go to your kids from a previous marriage. Meanwhile, you have your new family to protect.
The simplest solution is to take out a life-insurance policy and name the children from your previous marriage as beneficiaries, says Wendy Goffe, an estate-planning attorney in Seattle. The house and other assets would then go to the new family. If the insurance, added to your estate, would trigger the federal estate tax (payable on estates larger than $2 million in 2008 and $3.5 million in 2009), go instead with an irrevocable life-insurance trust, which keeps the money out of the estate.
Alternatively, you could give your spouse lifetime use of the house and the income to maintain it through a marital trust, such as a qualified terminable interest property trust, or QTIP. Such trusts end upon the surviving spouse’s death, after which the property goes to the heirs. Don’t name the grown children as trustees, says Goffe. “They will always be watching over the stepparent’s shoulder, wondering just how much money went to repair the roof.”
While you’re reviewing your arrangements, make sure you update your will, review your guardianship provisions and rename the beneficiaries on your retirement plans and insurance policies to reflect your new circumstances. Be aware that a qualified retirement plan, such as a 401(k), pays out to a spouse; if you name someone else as beneficiary, your spouse must waive the right to it after you marry. With an IRA or a SEP, you need no such waiver, although the accounts are subject to property laws.
SET A MOVING DATE
When both of you own a house, you have to decide whether to sell one and live in the other or sell both houses and start fresh. Before you put out two For Sale signs, consider that single homeowners can exclude $250,000 from the capital-gains tax, whereas married couples get double the exclusion provided they live in the house for at least two years. If one of your homes has appreciated more than $250,000, you’re better off living in that one for at least two years before selling it.
You don’t both have to be on the deed to qualify for the tax break, but you should retitle the house to reflect joint ownership if you want your spouse to have full title (you can accomplish the same goal in a will). Without any agreement, the house will be subject to state property-division laws upon your death or a divorce. You can file a joint tax return and deduct the mortgage interest regardless of whether one or both of you are on the title.
Question: Are you in a blended family? How did you manage the finances with respect to your children and their inheritance in the event one or both of you pass?
Capitalism comes to the world and evolved historically in a non-capitalist social milieu. In western European countries surrounding him first feudal milieu, from whose womb it emerges – ladies pyjamas the Fronwirtschaft in the countryside, the craft guilds in the city – and then, after stripping off of feudalism, a predominantly peasant-artisan milieu, as a simple commodity production in the agriculture as in industry. Moreover, European capitalism surrounds a vast terrain of non-European cultures, which presents the pyjamas whole range of stages from the most primitive communist hordes of migratory hunter-gatherers to farmers and artisan production of goods. In the midst of this milieu, the process is working forward of capital accumulation.