A new family calls for a new estate plan

In a typical estate plan, each spouse leaves their assets to the other. When the second spouse passes away, assets are distributed to the children. However, an estate plan is not usually typical when you remarry and have children from a prior marriage.

When you remarry, you’ll update your will and beneficiary designations—and you may change your estate plan to provide for your children upon your passing. In a blended family where both spouses bring children to the marriage, each spouse may revise their estate plan in this way.

One reason, among others, is that after a spouse passes, the other spouse could use the estate assets in ways that don’t provide for the children of the deceased spouse. Perhaps they launch a business that fails or remarry and leave their assets to their new spouse.

Here are several common ways to provide for children upon remarriage.

Enter into a marriage contract

Marriage contracts can serve a variety of purposes, including meeting the unique needs of a second marriage. Each spouse can protect their assets, provide for their partner and specify which assets will be left to their children. The inheritance for your children is safeguarded as the terms of the marriage contract take precedence over any future changes to either spouse’s will.

Purchase life insurance

A permanent life insurance policy can be an important estate planning solution when you have children and remarry. You can leave estate assets to your spouse and provide for your children by designating them as life insurance beneficiaries. The insurance proceeds are tax-free and pass directly to your children outside of your estate. Also, you ensure that your children receive the full amount you intend from the time you pay the first premium.

Own a share of the home

In a first marriage, couples usually own a home as joint tenants, where one spouse owns the home after the other passes away. However, in a second marriage, you may prefer to own the home as tenants in common, which gives each spouse a share of the property. When a spouse passes away, their share can go to their children.

Note that in Quebec, a couple can only own a property as tenants in common.

Gift assets during your lifetime

You can lessen the planning required to distribute assets through your estate by helping out a child financially during your lifetime; for example, you could gift them funds for a down payment on their first home. However, you must be sure—with our guidance—that these gifts don’t jeopardize your wealth plan. Also, for the sake of a healthy relationship, this method should have the blessing of your spouse. 

Establish a spousal trust

When you include a spousal trust in your will, you take care of your spouse and your children. Upon your passing, trust assets provide income for your spouse during their lifetime. When they pass away, trust assets are distributed to your children. You can stipulate terms for the trustee to follow and may wish to allow your spouse to receive payments from the trust’s capital if needed and warranted.

You are best off consulting a lawyer when deciding which approach to choose. Also, your lawyer can outline other methods available, such as creating a trust for a child or bequeathing specific assets to children in your will. 

Communication is key

Deciding how you’ll ensure assets are distributed to your children begins with determining which method or methods you and your spouse can agree to. For example, one spouse may be open to a marriage contract, while the other may be against it.

Once you’ve selected a particular approach, share your thoughts about why you made that choice. In a marriage, it’s beneficial for spouses to be transparent about financial decisions.

In some cases, you may also want to tell your adult children that they’ll receive an inheritance. This communication can promote harmony between your children and your spouse, since it means your children won’t worry that your spouse will receive all your estate assets.

You should also talk to your spouse and children about who you are appointing to administer your estate. Whether you designate one of them or another person, your spouse and children should be comfortable with your choice.