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California Estate Planning with Second (and Third) Marriages

Today’s topic is a hot one in the world of estate planning. Florida state planning in particular is pretty crazy when it comes to second marriages. So I may use some examples from Florida even though this is really you know, a national issue no matter what state you’re, you’re listening in. And an examples on state planning second marriages. Quite a few years ago, I had a very, very charming client come into the office, one of the most memorable of my clients to date.

And she and her husband came in and, and they were very charming. They were in their late seventies at the time, and they wanted to do some, some planning and they were a second marriage. And so they had kids from previous marriages the older people get them, or the chance that there would be a second marriage obviously. So we decided to do a joint trust for them. That was what they wanted and they were very harmonious in their relationship and in their goals. And so we did that trust and went through that process with them. And, and it just means that you do one trust for the couple and then you say in the trust, what happens upon the first spouse in the second spouse, spouse to pass in these kinds of things. So in that trust, we basically had the surviving spouse maintaining all of the assets for their life and then assets passing to their mutual beneficiaries upon the last spouse passing.

And what happened in that case is that some years later he passed away and lo and behold, his family members started coming out of the woodwork and wondering where their share of his assets were. So including his kids. And, and that’s the thing that can happen with a second marriage is just that you get a lot more adversarial kind of behavior upon the first spouse passing because you don’t have the same loyalties if it was your own kids. And obviously even with your own kids, there’s friction and issues that can come up and there’ll be some war stories you know, to talk about in future episodes. But so this one, this war story basically lot of the assets in the trust or had actually been hers, so that compounded things. And so what we decided to do was just move or do a new trust in her name and move her assets into it.

And then she, she diplomatically dealt with his side of the family and gave some things to them and, and was able to, cause she was a very charming person, able to handle the fallout without too much in terms of things going sideways. However, things could have if they had been very litigation minded or, or you know, whatnot, the state could have been jeopardized and her actual inheritance could have been jeopardized, eaten up in legal fees and these kinds of things. So, so with second marriages, you always have complications in. Of course, if I were to handle that matter now I would put, put a few more precautions on the estate and you live and learn, that’s why they call it practice, I guess. But anyway, so that was that. That’s an example though. And, and what I may have done is simply do two trusts.

Sometimes two trusts can be a very good solution for second marriages or you make the trust irrevocable upon the death of the first spouse or, or you just get really clear about how different beneficiaries are going to be treated and spell it out in vivid detail and the trust. So those are just the kinds of options that you can have. You know, when you’re dealing with second marriages in kids from previous marriages. So with that example in mind, you know, what kinds of things can be, can be done in terms of, you know, making sure there aren’t issues with second marriages. So one thing, one of the things that comes up immediately is just that you know, you have to do some planning. So if you have second marriages, you definitely can’t leave it to chance because of the intestacy laws. So in every state you have these, this body of law that kicks in in the event that there is no will or no other planning and that that’s basically that the state has a plan for you, you know, regardless of whether you have one or not.

And if you don’t have one to override it, then the state’s plan will kick in and they call that and test to see. So an intestacy marriage has a lot of weight and it really doesn’t matter which state you’re in. However, in the state of Florida, it’s pretty powerful. Got a couple of different things going on. You’ve got what we call the, the homestead laws, which are pretty powerful in Florida. And you also have what’s called the elective share and so basically in that and in many States that elective share, right rears its head in some form or another. So what that means is if there’s no plan or if there is a plan that the surviving spouse doesn’t like, they can actually move. To set it aside and say that I’m going to have to take my elective share. So this actually happened a couple episodes ago when we were talking about the Joe Robbie state and what happened with that.

There was a big pile of assets in Miami, dolphins, football team and the stadium. He’d spent, you know, millions of dollars of his own money to purchase those things and he had had a plan in place actually that was going to provide some lifetime support for his wife and she basically said, I don’t want that. I want to actually 30% of the estate right now. What she was doing was she was claiming that under the statutory elective share in Florida and she was allowed to do that. They said, we don’t recommend it because it’s going to create huge problems. She said, well, it’s too bad. And so they ended up selling the team in and having to take a bath on it and the stadium at what they called fire sale prices. So that is an extreme example, the kind of things that can happen. And of course, you know, Joe Robbie probably would have never intended that to happen and, and maybe it was rolling in his grave or whatever, you know, with that.

So the answer then is to have a plan that doesn’t allow the elective share and doesn’t allow the spouse to go ahead and set it aside. And there’s ways, and one of the biggest ways to do that, and we’ll jump right in, is a nuptial agreement. So a prenup or postnup will basically provide for waivers and homestead waiver. In Florida, if you’re doing a Florida prenup or postnup and you know, the elective share rights are waved and these kinds of things. So a prenup or postnup is not just for divorced. Also for state planning, people do not realize that. I would say nine and a half out of 10 people wouldn’t realize that. And even attorneys wouldn’t often realize that. And so, you know, it is for estate planning and it’s a very powerful way to contractually set aside the marital laws that can derail your estate plan and actually done some writing on that.

And it’s a major topic that is, is out there that needs to be learned. So so, so a big way then to deal with elective Sharon homestead, prenup, postnup prenups are better than post nups in my opinion, cause they actually have what we call consideration tached to them. And what that means is that you could argue that you wouldn’t have gotten married except for the, the prenup. So therefore that prenup needs to be enforced. It’s just a question of, of enforcing it, a court enforcing it. A postnup can be argued, well why would they, what was their benefit to signing it? And so you would say that there wasn’t consideration. That’s one way that you could challenge a posting them. So let’s, they got something big. Maybe they got a pile of assets or something like that that can help that. So, so those are things, you know, the, the lecture of share, homestead prenups and post nups, you know, the other, and those are probably the best ways to handle it.

The other way to get to make sure perhaps that, and this is the other side of it, that if you don’t have a plan in say the of Florida again and somebody were to have one spouse dies and the couple is living in the home that was purchased say by the husband prior to the marriage and it wasn’t titled in both spouses names. So it can happen is that a court can find that the surviving spouse can have it for life, but that it’s got to go to his kids upon her passing. In this example, he died first. So that’s another thing, like you want to do joint titling. If you want to make sure that your second spouse or is protected, doesn’t have to compete with the kids, then you also want to plan for that reason. So that’s the other side of it.

And one hand you’re wanting to protect the kids perhaps and those assets, those family assets from sort of a gold Digger syndrome, which this is all kinda got that in the background. Let’s be honest, people were thinking prenup postnup the younger you know, young Hottie spouse or whatever. But you also have situations where the kids get pretty predatorial and so you want to make sure and cover those things in terms of, you know, in terms of the planning that’s being done. And the other thing that you can do, I should mention is AB trust planning. You split up the assets. I touched on this, what I may have done in the case, you know the story that I mentioned at the beginning, the podcast and you can do separate trusts for people and keep their assets separate and you can kind of say whatever you want in those separate trusts. Of course, this is all very flexible and there’s a lot of different things that can be done.

Steve Gibbs, Esq.