Second Marriage and Estate Planning
This topic has come up a few times over the summer so perhaps it’s time to explore what you need to know. Even if this situation does not apply to you, I hope you will continue to read as there is likely someone you know or care about that may be in a second marriage or common-law relationship.
For the purposes of this article, I’m looking at situations where the children are now adults and no longer dependent and there are no dependent adult children due to a disability.
So, how do you arrange your affairs when you are in a second relationship? When I refer to married, I do include common-law relationships as well. There are some differences, but there are more items that are the same.
First keep in mind that when you get re-married, it automatically revokes any existing Wills (unless the Will referred to the upcoming marriage.) Common-law relationships do not revoke Wills.
Also look at any items that you have named a beneficiary: life insurance and registered assets (RRSPs, RRIFs, TFSA) are the most known ones. Getting married doesn’t change these beneficiaries. And maybe that’s ok. Maybe there are some assets you do want to leave to your own children; or maybe the separation agreement stipulates you must keep your previous spouse as your beneficiary. Regardless, review your beneficiaries on these assets.
Look at your joint accounts and other joint assets. Most joint assets (like bank accounts and vehicles) go to the surviving owner(s) if they are considered “joint with right of survivorship”. If you have joint assets with your new spouse, remember that asset will be passed outside of the Will and he/she will become the sole owner of the asset. Is that what you want? Maybe it is. But if it is not, you better do something about it (make some references in your Will).
One asset that has come to my attention more recently is mobile homes not located on property you own (homes in Paradise Village for example). These homes are not considered “marital property” as defined in the Homestead Act of Manitoba. If you own the property outright and you want your current spouse to live in it as long as he or she wishes, then you need to indicate that in your Will.
If you are living with someone or remarried to someone and live in their home (like a mobile home on leased property), you need to know what will happen if they should predecease you. You do not have the marital right to stay there. Discuss with your new spouse what his/her intentions are. If he/she wants you to stay there for a certain period of time (a few years) or until you are ready to move or pass away, then it needs to state so in the Will.
If you are living in their home and it’s a regular home on owned land, then you are covered by the Homestead Act. You have the right to live there as long as you want (you are still responsible for property taxes, insurance and utilities). The home would remain as an asset of the estate and held by a trustee (usually the executor(s) for the estate), but you have the right to live there.
Also, the asset, if in joint names, will be considered “joint with right of survivorship” and not “joint tenants in common”. Tenants in common means the asset is owned jointly, but when one owner dies, his/her share goes to the estate and not to the joint owner. Normally registered property in Manitoba is considered as such. But not mobile or other homes on property that is leased or rented; this is a regular asset much like a bank account and is considered joint with right of survivorship.
Second marriages should consider having “Mutual Wills”. They are normal Wills, but include a clause or contract that states neither of you can change your Will after the other one dies. This is often to ensure assets are eventually shared amongst all the children of both spouses. This ensures your combined assets eventually go to both your children and your spouse’s children equally (if that is what you want to have in your Will).
Mutual Wills can be used for first marriages too. You may think that your spouse would never intentionally leave out your children and you are probably right. But assuming you die later in life and leave your spouse widowed, your spouse wouldn’t be the first trusting senior to be taken advantage of. Or the adult children become distant because of a new spouse, there is a tendency for the surviving spouse to want write your children out of the Will. A true Mutual Will would prevent this.
So what are some other estate planning items to consider?
You can leave part of your estate to your spouse and part to your children. You can leave your estate in a spousal trust so that your spouse can use what is needed for his or her lifetime, but the estate in general will be held for the children.
You can give some money to your children now while you are alive (assuming you don’t need the money to live).
As you can see, estate planning for second marriages requires some detailed thought and planning. Don’t assume everything will work out. Take the time to plan ahead.
Come talk to me or call me for a preliminary discussion, but I will likely refer you to a lawyer to get your wishes in order via a well documented Will.
Anni Markmann is a Tax Professional and owner of Ste Anne Tax Service. She lives, works, and volunteers in our community. Contact her at 204-422-6631, firstname.lastname@example.org or 36 Dawson Road in Ste Anne.