Estate Planning Tools for Second Marriages, 1216 COBJ, Vol. 45, No. 12 Pg. 45
| Author | David W. Kirch, Laurence I. Gendelman, J. |
David W. Kirch, Laurence I. Gendelman, J.
Trust and Estate Law
This article explores estate planning for clients with previous marriages. It considers ethical issues and recent developments in the law relating to such planning and discusses tools to help clients achieve their goals.
Estate planning for clients who have previously been married presents unique challenges for practitioners concerning issues of both inheritance and family relations. This article advises estate planners on tools and best practices for working with clients who have previously been married.
Remarried couples face distinct estate planning issues. Most notably, spouses who bring children from a prior marriage into a new marriage typically want to ensure that these children inherit at least a portion of the assets brought into that new marriage. Additionally, couples who remarry are typically older and are more likely to each hold substantial separate property. Attorneys must be aware of these issues and be prepared to advise clients both verbally and in writing of the relevant legal considerations and options involving marital rights. The client’s decision to choose, or to not pursue, particular options should also be committed to writing.
For the purposes of this article, “second marriage” refers to any subsequent marriage.
Ethical Considerations
Ethical issues in estate planning representation arise more frequently in second marriage situations, which are increasingly common due to the high rate of divorce and the fact that people are living longer.
Confidentiality
Client engagement letters should address confidentiality issues when planning is being done for both spouses in a second marriage.
Some experienced attorneys believe that separate representation of spouses is possible and that confidentiality exists as to each spouse. However, the ACTEC Commentaries on the Model Rules of Professional Conduct (MRPC) caution against this because a lawyer may be unable to adequately r epresent one spouse without disclosing a confidence of the other. ACTEC Commentary to MRPC 1.6 specifically provides that lawyers should exercise great care when representing both spouses because the lawyer has duties of impartiality and loyalty to each client and because separate representation of each spouse may limit the lawyer’s ability to adequately advise each client.
Representation is not prohibited when a conflict of interest exists if the CRCP 1.7(b) requirements are met. Among other rule requirements, the client must give informed consent and waive the conflict in writing. Comment 22 addresses the effectiveness of such waivers, which is generally determined by the extent to which the client reasonably understands the material risks that the waiver entails. As a practical matter, a letter evidencing the attorney’s recognition of the conflict can be a double-edged sword, as recognition of the conflict may become relevant in a malpractice lawsuit.
Rights of the Surviving Spouse
It is always important to advise clients in second marriage situations of the surviving spouse’s rights to the elective share and allowances and the presumption of joint tenancy as to tangible personal property.1 Clients should be informed, in writing, that if their surviving spouse remarries, this creates a new set of rights in the new spouse, potentially entitling the new spouse to a large portion of the client’s assets. Frequently, however, clients decide to simply trust each other.
Lawyers must also explain to clients that while they may have reached an informal agreement regarding their estate, the surviving spouse is not legally obligated to follow that plan. Experience indicates that more often than not, the relationships among the surviving spouse and the children of the deceased spouse deteriorate after the death of the first spouse. Therefore, clients should be advised in writing that absent a formal agreement, a surviving spouse has no obligation to maintain an estate plan that benefits the children of the deceased spouse.
In Baker v. Wood, Ris & Hames, PC,[2] siblings sued their father’s attorney under the theory that the attorney owed them a professional duty. While the Court of Appeals found that the attorney did not owe any duty to the beneficiaries, estate planners should be cautious when working with clients who have children from previous marriages.3 Documenting client decisions and confirming them in writing is a best practice to minimize lawsuits from dissatisfied beneficiaries of parents in second marriages.4 If communication with a beneficiary becomes necessary, estate planners should provide that beneficiary with a written statement confirming their non-engagement and encouraging the beneficiary to seek independent legal counsel.5 Otherwise, practitioners risk forming an attorney– client relationship with that beneficiary and having a professional duty to protect the beneficiary’s interests.6
Estate Planning Tools
Useful estate planning tools for second marriage situations include trusts, contracts to will, gifts, life estates, divorce, and prenuptial and postnuptial agreements.
Trusts
Trusts are versatile tools that can add flexibility to an estate plan to deal with special issues that arise in a second marriage. If the client has children from a prior marriage, increased control over the disposition of the estate under the terms of a trust may be desired. For example, a trust may allow a s urviving spouse to remain in the marital residence while also addressing what happens if that spouse no longer lives there, such as when the surviving spouse becomes institutionalized or acquires a new residence. The payment of expenses such as mortgages, taxes, repairs, and insurance on the residence should be addressed.
When no marital agreement exists, the surviving spouse could elect against the will of the decedent. Clients should thus consider including a forfeiture provision in the trust, such as: “In the event a statutory election is made, my surviving spouse shall be deemed to have predeceased me.”7 Otherwise, the value of the surviving spouse’s interest in the trust will have to be determined in calculating the spouse’s elective share or similar rights.
Clients must also consider that trust administration may add complexity and expense to estate administration.
Contracts to Will
“A contract to will is an agreement between two persons to devise property according to a ‘common plan’ by means of a contract that cannot be unilaterally revoked.”8 A contract to will becomes irrevocable and binding on the surviving spouse at the time of the first spouse’s death. A contract to will may be written into the will itself or be made as part of a marital agreement or as a separate document (if the requirements for such documents to be binding are otherwise observed). A contract to will that is separate from the will may provide more flexibility and certainty than simply stating in the will that both spouses contract not to change their will. Frequently, prenuptial and postnuptial agreements and contracts to will are combined into one document or used in conjunction with one another to form an estate plan.
Contracts can be created through (1) provisions in the will stating the material provisions of the contract; (2) express reference to a contract in the will, and extrinsic evidence proving the contract terms; or (3) a decedent’s signed writing evidencing a contract.9 Mutual or mirror wills have sometimes been interpreted or found to operate as creating contracts to will.10...
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