When you are in a “second” marriage, one of the main questions when planning your estate is how to divide the assets when the second of you dies. First, before getting to this question, you should really consider using a trust in your estate plan to ensure that there are assets left for the children. Without a trust, if the survivor of you remarries, the new spouse could end up with the assets and leaving the children little to nothing.
Couples in a “second” marriage usually decide to divide up their assets in one of four different ways:
- All One Happy Family: In this distribution plan, the assets are divided equally among all the children. Each child is treated as an equal, regardless of which side of the couple the child comes from. If there are five children, then everyone will receive a fifth portion of the assets. This is most common when the second marriage is a long-term marriage.
- By Each Family Tree: In this distribution plan, the assets are divided as if moving down the family tree. First, the assets are divided with half to a husband’s side and a half to a wife’s side. Then each half is divided among the parent’s particular children. For instance, assume a husband has two children and his wife has three children. The husband’s children will equally divide the half allocated to his side, while his wife’s children will similarly equally divide the half allocate to her side. This results in the husband’s children each having a fourth portion of the assets, while his wife’s children receive a sixth portion. The result is that each side of the family is treated equally, even though all the children do not receive the same equal portion.
- Who Brought What: In this distribution plan, the assets are divided based on who brought what to the marriage. Sometimes, it is a literal division. For example, a husband brought a specific bank account that is designated back to his children and his wife brought a certain piece of real property that is designated back to her children. It is based more on a percentage or ratio that incorporates a “By Each Family Tree” concept. If the husband brought 30% of the assets to the family and the wife brought 70%, then the assets will be allocated 30% to the husband’s children and 70% to the wife’s children. At this point, the “By Each Family Tree” division is used so that the husband’s 30% is equally divided among his children and the wife’s 70% is equally divided among her children. Using the example above with these percentages, the husband’s two children each receive a 15% portion and the wife’s three children each receive a 23 1/3% portion.
- Something Else: Some couples do not use any of these three distribution patterns described above. Instead, they have a totally unique idea on how to allocate the assets. Maybe a larger portion is allocated to a child who has special needs and will need significant financial resources during the child’s life. Or one child is distant from the family and not part of the asset allocation at all. There are many reasons why a couple may choose their own allocation formula.
If you have questions about dividing your assets in your second marriage, you will need to discuss your options with an experienced estate planning attorney. At MHPS, we can help. Contact our firm today for a free consultation.