How do I protect my assets in a second marriage?
“We each want to provide for our own children”
I am Remarried and Want To Protect My Children’s Inheritance
With well over a third of relationships failing, there are more single people seeking to re-partner, whether it be in a marriage or a de facto relationship.
Many of these new couples are of mature age, with adult children and grandchildren and some assets. Estate planning for them can require considerable care, and a lack of thought can lead to problems!
Let us look at a couple of scenarios, both of which are based on actuality.
George and Marcia were well into their sixties and widowed when they got together. They decided to live in George’s house, and Marcia then sold her home. She had two children, and each of them had given Marcia grandchildren she dearly loved.
Both her children were having a bit of a financial struggle, so Marcia gave them the sale proceeds from her sale.
As time passed, George and Marcia realized that the care of a large and older home was beyond them, so George sold his home and bought 2 units in a retirement village. They put a doorway between the units, and Marcia basically lived in one and George in the other.
Marcia died, and her children said that Marcia’s unit should form part of her estate, which was being left to them. They conveniently forgot – or ignored – the fact that they had effectively had their inheritance from their mother, and that if they were to have her unit, that had been funded by George, and represented part of the inheritance his family might well expect. Marcia’s children were persuaded to forget their claim, but this does illustrate the way in which either a lack of thought or consideration, or greed, can lead to difficult situations.
Alan and Joy were both divorced, in their sixties and both have children and grandchildren. Both own a home, and have other investments, so they are financially comfortable.
They decide to live in Alan’s house, and rent out Joy’s home. They share the desire to make sure that the survivor of them is well looked after, and that Joy can stay in Alan’s house if she wants to. On the other hand, they each want their assets to eventually pass to their own children, not the others!
They have to consider many factors. If Joy lives in Alan’s house after his death, issues may arise with Land Tax and Capital Gains Tax. Will she be responsible for maintenance and outgoings, and will she have adequate funds to do this?
What is to happen if she wants to downsize – can she use part of the sale proceeds, and in whose name should a replacement home be purchased?
Given that Joy owns a home and has some other investments, to what extent is it appropriate to make Alan’s children wait for some of their inheritance?
Obviously any decisions they make will be very personal, and some specialist advice will be needed. When they have agreed on what they want to do, those arrangements will need to be documented, both in their respective wills, and in a Binding Financial Agreement, which is under the Family Law Act. Such an agreement can cover not just what is to happen if the relationship fails, but what are the financial arrangements while the relationship continues.
Some of us find it hard to face up to the necessity of dealing with these issues, but it is usually easier to deal with them at the start of a relationship. Your families will almost certainly thank you for putting sensible arrangements in place!