Trust - Late in Life New Spouse

[PatrickA5]

Has anybody set up a trust that would prevent a 2nd spouse (late in life) from getting surviving spouse assets?

My recently deceased FIL married a second time at 84 years old. He was married about a year before he passed. Fortunately, he had beneficiaries named on most of the larger assets. DW and SIL got the majority of the assets. He did leave his new wife an IRA with about $200K. Again, this is what he wanted and we didn't have a problem with her getting it. Still, she's not likely to live much longer and it bugs DW that 2nd wife's deadbeat kids will end up with her dad's money.

Also, when it came time to probate the Will for the remainder of the assets, it got a little messy.

When I die, is there a way I can set up a trust so that "Biff the pool boy" doesn't get the estate when DW passes. We've talked about it and both promise that our money would be passed down to the kids and grandkids, but you never know how things will go.

I'm just worried that her next house might have a pool.

 

[RetiredHappy]

You can always leave whatever you wish to leave to your kids and DW in your trust. As your DW, she has earned the right to do whatever she wishes with what she gets in the estate, including to Biff the pool boy if she wishes.

The $200K which your late FIL left to his wife is peanuts. She kept him happy until he passed. She had earned it.

 

[OldShooter]

... When I die, is there a way I can set up a trust so that "Biff the pool boy" doesn't get the estate when DW passes. We've talked about it and both promise that our money would be passed down to the kids and grandkids, but you never know how things will go. ...

Sure. Put whatever assets you like into a trust for her. Probably something along the HEMS line: https://trustandwill.com/learn/hems-trust. Then specify that upon her death, the residual amount in the trust is to go to whomever you like. Or leave the trust to continue with someone new as the beneficiary. Do not attempt to do any of this based on SGOTI. You need a specialist lawyer to get your estate plan right.

 

[MarieIG]

It's not unheard of that both spouses set up a trust for the lifetime of the other - with the kiddos as secondary beneficiaries. You would want to consult a trust and estate attorney who is familiar with the laws of your state.

 

[rodi]

When my dad and stepmom redid their trusts they both chose to leave the bulk of their estates to their respective offspring. Since they were living in her house, her's had instructions to give him a year to find someplace else to live. My dad was worried that stepmom wouldn't have enough money to maintain the house so he left her a specific amount in hopes she'd be able to maintain the house.

But the facts are the person who's getting the trust gets to decide where their money goes. But the potential heirs.

 

[PatrickA5]

The $200K which your late FIL left to his wife is peanuts. She kept him happy until he passed. She had earned it.

As I said, DW and SIL had no problem with 2nd wife getting the IRA. She was also left with a life estate on the house that lets her stay there as long as she'd like. We didn't have a problem with that either. We've been helping her with a lot of stuff, that her own kids won't help her with. She's a wonderful lady. The only "issue" is her kids will eventually get the money (she doesn't need it) and they "could" cause a problem if they were to move into the house. I know FIL wouldn't want her kids getting "his" money.

Just looking for some options.

 

[socca]

Ask your favorite estate lawyer about a QTIP Trust. I've seen such a trust work successfully (so far). As always, there are many details you'll need to discuss with the lawyer before going this route, but this could work for you.

 

[donheff]

A standard family trust is intended to do this to an extent. When you die your assets go into a trust, you designate your spouse (or someone else) to administer the trust with the trustee free to use the trust assets to support your spouse. When she dies, the remainder go to the kids, or wherever. Of course, the spouse/trustee could embrace a "blow that dough" lifestyle and away we go. Maybe DW takes Bill the Pool Boy to live in a beach front condo in Hawaii.

IRA's and other such accounts are not generally put into trusts because of tax issues. If your spouse is the designated beneficiary, those accounts become theirs. If you are concerned enough about the spouse's judgment, a good estate planner could advise you how to deal with the IRA's with the best practicable tax implications. I suppose, if you trust the kids enough, you could pass the IRAs to them with instructions to take good care of your spouse, but that just passes the original concern down a level to kids and their SOs.

 

[marko]

We have a trust that specifies that should we die first, my brother receives $X held in trust. At the end of his life, any remaining funds go not to his estate, but to other heirs.

So, yes you can.

 

[pacergal]

As I said, DW and SIL had no problem with 2nd wife getting the IRA. She was also left with a life estate on the house that lets her stay there as long as she'd like. We didn't have a problem with that either. We've been helping her with a lot of stuff, that her own kids won't help her with. She's a wonderful lady. The only "issue" is her kids will eventually get the money (she doesn't need it) and they "could" cause a problem if they were to move into the house. I know FIL wouldn't want her kids getting "his" money.

Just looking for some options.

It is "her" money now, she can do with it as she wishes. Do you know for sure her will states that IRA goes to her kids?
If your FIL did not want her to have access to the $ or to pass it along as she wished, he might have stated that.

Given the fact that you are helping her now, your have a good relationship with her and like her. It would seem that she gave your FIL love and companionship for his last year of life. Let it be.

 

[PatrickA5]

It is "her" money now, she can do with it as she wishes. Do you know for sure her will states that IRA goes to her kids?
If your FIL did not want her to have access to the $ or to pass it along as she wished, he might have stated that.

Given the fact that you are helping her now, your have a good relationship with her and like her. It would seem that she gave your FIL love and companionship for his last year of life. Let it be.

I don't know for sure she has a will. I know the IRA goes to her kids because I set it up for her.

FIL wouldn't have wanted the IRA to go to her kids (since she was always complaining about them wanting her money), but he wasn't the type to get any kind of professional advice. The only advice he would take came from his coffee buddies His Will was nearly 40 years old and was a Joint will with his first wife. He got a deal from a lawyer friend that did it for $20. He wouldn't entertain the thought of paying money for a new will.

I only brought up FIL's experience as an example of what we will try to avoid. Up until right before his death, he told DW everything was going directly to DW and her sister. He refused to let us actually see anything. He had an envelope with his instructions that could be opened only after his death and he warned DW that he could tell if she opened it early -

 

[PatrickA5]

Thanks for all of the suggestions so far.

We have a meeting set up with an estate lawyer. I'm still doubtful that we'll go this route, but need to get more up to speed on our options.

Our current estate attorney suggested looking into a trust, but she dropped the ball too many times during FILs probate to consider her. She knows her stuff, but is very unorganized and has a hard time effectively communicating. She said she charges $2,500 which is probably cheap.

At the very least, we'll get our Wills updated now that the kids are all grown. Not entirely necessary, but might as well do it.

 

[PatrickA5]

Just a clarification. We are not looking to do anything with FIL's situation. It was his money and is now her money. The only reason I brought it up was as an example of something we would like to avoid with our own situation.

We've been married forever and trust each other to do the right thing regarding leaving the money to the kids, but you never know. I've seen enough Lifetime movies to know that we can be taken advantage of in our elder years.

 

[silvor]

We've been married forever and trust each other to do the right thing regarding leaving the money to the kids, but you never know. I've seen enough Lifetime movies to know that we can be taken advantage of in our elder years.

Things and attitudes can change when one spouse dies. I would figure this out now.

 

[badatmath]

Things and attitudes can change when one spouse dies. I would figure this out now.

Yep step dad remarried after my mother passed and that will was a whole new ballgame . . .

 

[Markola]

If I am ever in that situation, I’d try to take care of DW#2 with a series of charitable gift annuities or a charitable remainder trust. That way, at least those dollars would eventually flow to causes I care about rather than her shirt tail relatives.

 

[Route246]

Wife and I have substantial investable assets. What is the simplest way that Late in Life New Spouse doesn't plunder those assets assuming one of us dies first and remarries? I'm even thinking of myself if my wife dies and I get remarried (she has the same concerns). We hear too many horror stories of step-parent showing up late and taking an unintended, unfair amount of the estate when that step-parent is widowed and surviving children get little or nothing.

Is there a simple structure that states lineal family members (blood relatives) on both my side and my wife's side get most of the estate and new spouse gets a fair and proportionally equitable share? Sounds like a complicated prenup and trust/will structure.

Don't care much about the house, it is less than 15 percent of the assets and not investable. We want to protect the assets from the surviving step-parent assumes both of us die, one remarries and dies before new spouse. We are quite aware that money changes people and most often not for better. Anna Nicole Smith tried to pull this one off if I remember correctly.

Obviously there are serious tax considerations and planning required.

 

[Amethyst]

From what I've seen, the big thing is who you designate as beneficiaries on your accounts.

 

[oldtimer]

And refrain from joint accounts with new spouse.

 

[GrayHare]

A trust can specify whatever beneficiaries you wish, in whatever proportions you wish. Some have "pool boy" clauses that prohibit access by a future spouse, if that is preferred. Often some or all of those beneficiaries are made trustees upon your passing, but that does not need to be the case.

 

[PatrickA5]

I started this thread a few months ago. After visiting with several lawyers and learning as much as I could about the issue, in the end, we decided to just update our Wills and not do a trust at this time. We might take a relook in 5 or 10 years. We're both on the same page on what we want the survivor to do to keep the money in the family, so there shouldn't be any problems (hopefully).

 

[Route246]

From what I've seen, the big thing is who you designate as beneficiaries on your accounts.

That works however we are trying to predict in the future, considerations is that grieving and money can change people and situations for the worse so it is a tough problem. Additionally, just being a beneficiary for x dollars (say a few million) can also change someone's judgement and outlook on things. Thinking rationally now does not assure rational thinking when traumatic or disruptive events happen. It would be nice to have something in writing to state clearly wishes for each corner case and contingency. It is probably too big of an ask.

And refrain from joint accounts with new spouse.

That may be OK, just refrain from converting any existing accounts to joint accounts and limit the damage that way. Good point.

A trust can specify whatever beneficiaries you wish, in whatever proportions you wish. Some have "pool boy" clauses that prohibit access by a future spouse, if that is preferred. Often some or all of those beneficiaries are made trustees upon your passing, but that does not need to be the case.

Thank you. All good points to consider. Pool boy extends to housekeeper for the other gender. I am well aware of my own emotional weaknesses, especially if I were a grieving widower and I'm actually more worried about if I am the survivor rather than my wife. In other words, I have more faith in her doing the right thing if this tragic even happened than I have faith in myself. It would be easiest if these things were written down and sealed up more tightly.

I started this thread a few months ago. After visiting with several lawyers and learning as much as I could about the issue, in the end, we decided to just update our Wills and not do a trust at this time. We might take a relook in 5 or 10 years. We're both on the same page on what we want the survivor to do to keep the money in the family, so there shouldn't be any problems (hopefully).

Hopefully is a big ask because we have seen and heard of situations where children get shutout and undeserving step-children end up with the goods in the end. Tragic in all ways.

 

[cathy63]

That works however we are trying to predict in the future, considerations is that grieving and money can change people and situations for the worse so it is a tough problem. Additionally, just being a beneficiary for x dollars (say a few million) can also change someone's judgement and outlook on things. Thinking rationally now does not assure rational thinking when traumatic or disruptive events happen. It would be nice to have something in writing to state clearly wishes for each corner case and contingency. It is probably too big of an ask...

Buy an hour or two of an estate attorney's time and discuss this with someone who knows what they're doing. Your profile says you live in NorCal. California is a community property state, which has some great advantages, but it definitely adds complexity when you're thinking about second marriages and inheritances for children from the first marriage. Your surviving spouse already owns half the marital property with you, so you can't control that with your own will. If they treat it as community property with their new spouse, then when they die, their surviving second spouse has rights to that property as well.

Things like prenups, irrevocable trusts, and documenting separate property might be the answer, but neither of you is going to be thinking about those things when you meet spouse #2. Having previously established a relationship with an attorney and set up an estate plan with spouse #1 might be the thing that triggers you to make a pre-marital visit to that same attorney before the second wedding, so do that part now.

 

[Route246]

Thanks. The whole stepchildren thing is concerning. They have truly done nothing to deserve any windfall (greater than a penny) yet they often end up with a windfall to the detriment of more deserving children.

In Japan where things work very differently and the tax system is extremely punishing if you are not related by blood (lineal relative) you receive literally nothing by default unless it is explicitly called out. The left over assets are protected and there is no joint ownership of property or financial accounts (bank, brokerate, retirement, etc) so things are greatly simplified.

I would prefer something like, upon the death of either spouse the trust assets become locked (perhaps a harsh term, maybe owned or controlled) by fiduciary and the surviving spouse is allowed to withdraw a limited amount of discretionary value per year (say 250K inflation adjusted, etc.). I can live with that restriction as long as it releases funds for emergency medical and caregiving, etc. but not for general living expenses.

The problem is there are so many corner cases involved so it is difficult to catch all or most of them.

Buy an hour or two of an estate attorney's time and discuss this with someone who knows what they're doing. Your profile says you live in NorCal. California is a community property state, which has some great advantages, but it definitely adds complexity when you're thinking about second marriages and inheritances for children from the first marriage. Your surviving spouse already owns half the marital property with you, so you can't control that with your own will. If they treat it as community property with their new spouse, then when they die, their surviving second spouse has rights to that property as well.

Things like prenups, irrevocable trusts, and documenting separate property might be the answer, but neither of you is going to be thinking about those things when you meet spouse #2. Having previously established a relationship with an attorney and set up an estate plan with spouse #1 might be the thing that triggers you to make a pre-marital visit to that same attorney before the second wedding, so do that part now.

 

[Calico]

For those folks mentioning "pool boys" or "housekeepers" I'd just like to point out that the risks there are not necessarily gender-specific.

Either one can apply to either gender. Just saying.

So glad I could add yet another layer of complexity to the issue!

P. S. This thread has convinced me (if I ever needed convincing) never to embark on a late-life marriage. The financial issues with "step families" are way too complicated.