Discusses the importance of placing provisions into a trust to ensure the natural children of your marriage are protected
Lawyers sometimes speak about you and your spouse as adversaries. Of course, it shouldn't be that way, and it doesn't have to be that way. In this article, we're going to consider you and your spouse a team. We'll talk about the somewhat uncomfortable topic of how to protect the survivor in the event that one of you dies prematurely. The likelihood of a remarriage in the event of a young spouse's death is very high. This might not be something you want to think about. But consider the following very real statistics: o 54% of women who are under 45 when widowed remarry. o 91% of men who are under 50 when widowed remarry. o The median length of time to remarriage after being widowed from a first marriage is 3 years for men and 4.4 years for women. Whether for statistical reasons, or just the fact that we men are needier creatures than women, widowers get remarried more often and more quickly than widows Anecdotally and statistically speaking, the widower's future wife is likely to be younger than his current wife and is likely to have her own children, who will be legal rivals, in a sense, of the couple's current children. When it comes to who gets what when your estate passes on, it's wise to come up with a loving, caring solution up front that will protect your assets for your kids.
The protection that we commonly build into a trust (trusts are discussed in detail elsewhere) is what's called remarriage protection. We typically like to set up what's called an A-B trust, which splits the estate into two sub- trusts: the A trust and the B trust. In this arrangement, the "B trust" is irrevocable and the principal cannot be accessed by the surviving spouse except under certain conditions. One of the conditions you can add is that the surviving spouse must obtain a prenuptial agreement if he or she remarries. The terms of the premarital agreement can even be outlined in this "remarriage protection" trust. In order to continue to gain access to the principal of the B trust, as either a trustee or the principal beneficiary, the surviving spouse must follow these dictates. Note: California law will not by default protect the children of one marriage from losing valuable property and inheritance rights from the children of a future spouse's former marriage. There are many reported appellate opinions (cases that have gone to trial court and been appealed) where the natural children are "aced out" of their natural parents' wealth by late-in-life changes to the planning (perhaps when the surviving spouse has taken ill and is subject to the influence of various "helpers"). Provisions should be built into the estate plan to address this increasingly common situation.
In an earlier era, many older men, jealous of the prospect of their younger wives getting remarried after their deaths, attempted to put in restrictions that forbade remarriage or disinherited their widowed wives in the event those wives remarried. (Oddly enough, they typically did not include similar provisions for themselves if their wives predeceased them.) As a result, at least one California case resulted in a ruling that such restrictions are void because they are against public policy. (There is a public policy in favor of marriage.) In California, neither spouse can contractually prohibit remarriage of the survivor. The idea of remarriage restrictions in the A-B trust was created to properly address the barrier imposed by these laws. This is why the terms of the trust don't disinherit the survivor if the surviving spouse remarries, but instead simply require that the surviving spouse, when remarrying, enter into a premarital agreement that protects the first spouse's nest egg for the natural kids of that marriage (or they will not be able to serve as trustee, and the deceased spouse's assets will go to their children immediately). After all, the original spouse set up the trust for the benefit of his or her original family, not some future interloper and his or her family. It stands to reason that it should be protected from the future (possibly opportunistic) children of a second marriage, or the children that come into a second marriage through the new spouse. Because this language supports both the public policy of remarriage and the public policy of honoring the wishes of the deceased, it is far more likely to pass the public policy test in California than an outright ban on remarriage, as happened in the earlier cases from the 1950s and '60s.
Adam and Amy (and Hank)
Often, when couples consult an attorney to set up a revocable living trust that splits into an A-B trust upon the death of the first spouse, husbands are thinking as much about their children as they are about protecting their surviving spouse. Our experience tells us that wives nearly always plan on surviving their husbands. In most cases, they are thinking primarily about their children and not so much about their husbands. The long-term game plan in all of this is that the B-trust--the trust that holds the deceased spouse's 50% interest in the community and 100% interest in his or her separate property--goes to the child or children. Let's visit a scenario of a couple that did not do any such planning: Amy and Adam never got around to doing any estate planning. They were young; Adam was busy getting rich, and it wasn't a priority for them. Unfortunately, Adam died in a car accident at the age of thirty-six, leaving Amy with two young children. Without an estate plan in place, all of Adam's significant properties (founders' shares, real estate and intellectual property assets) were considered part of their community property and passed directly to Amy, outright. Within a few years, Amy remarried and had two more kids with her new husband, Hank. This new couple didn't do any estate planning, either. They bought property jointly, opened joint accounts, and commingled their assets as any loving young couple would do. Then Amy died. Hank was left almost everything that Amy had, which was also everything that Adam had. Hank had become accustomed to treating Adam's original estate (and Amy's for that matter) as his own. Although he loved all the kids, he was naturally more attached to his own younger children with Amy, rather than Amy's two now-adult children from her original marriage to Adam. The bottom line is that Adam's children were mostly cut out of this family's estate - wealth that was created by Adam's efforts in the first place!
Parents are always looking out for the best interests of their children as well as their spouses. Instead of simply settling for what the Probate Code dictates, a proactive remarriage-protection plan assures that your children will be protection after your death.
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