Second marriage asset protection: What you need to know
Of paramount importance for many people in a second marriage is how to protect their assets if their relationship breaks down, or in the event of their death. Although second marriages bring a level of complexity, there are a number of strategies that you can implement to ensure that your assets are protected.
Let’s explore some of the options available to you and what you need to know to protect your assets.
Binding Financial Agreement
A Binding Financial Agreement, often referred to as a pre-nup, allows you and your spouse to put in place a legal agreement which outlines how your assets will be dealt with in the event that your relationship breaks down. Should you wish, it can also extend to the provision of financial support for either party. The intention is for each party to protect their own assets, and such agreements can be put in place prior to a marriage or during a marriage if both parties consent.
Like any legal document, a Binding Financial Agreement needs to be well drafted to ensure that it encompasses all relevant information, and it is important that you seek the advice of a family lawyer to assist you with putting this important document in place.
Joint Assets v Individual Assets
The manner in which you hold your assets is of paramount importance. All joint assets pass to the surviving party. If you and your spouse own a property as joint proprietors upon your death this property will automatically pass to your spouse. By changing the manner in which you hold the property from joint proprietors to tenants in common allows you and your spouse to deal with your individual interest in the property in your respective Wills.
Additionally, you need to be mindful of any bank accounts or other investments that you hold jointly with your spouse as these are not individual assets that you can make provision for and will pass to your spouse upon your death.
Your Will
It is imperative that you put a Will in place that is reflective of your current circumstances and adequately provides for both your spouse and your children from a previous relationship in the manner that you desire. For many parents in second marriages with children from a previous relationship, protecting their children’s inheritance is of paramount importance.
Discretionary Testamentary Trusts which are created in accordance with the provisions of your Will, can make provision for your spouse during their lifetime, whilst also ensuring that most of your assets go to your children.
If you are the sole registered proprietor of your residence in which you and your spouse reside you may make provision in your Will providing a life interest in your residence to your spouse subject to some conditions being adhered to. This will allow your spouse to reside in your residence for the duration of their life then subsequent to their death the property may then pass to your children.
Dying without a valid Will in place deems that you died intestate, and your assets will be distributed in accordance with a government formula and may not end up with the people who you would like to receive them. Your spouse would be entitled to a share of your assets, however this may not have been your intention, or the share that they would receive may be significantly more than you would like them to receive.
It is therefore crucial that you take the time to put a well drafted Will in place so that your assets pass to those who you would like to receive them upon your death.
Mutual Wills Agreement
A Mutual Wills Agreement is a separate document to your Will and essentially is an agreement between you and your spouse that both of you will not change your Will without the consent of the your spouse or their legal personal representative upon their death.
This document is intended to prevent the remaining spouse from altering their Will and disinheriting step-children or making other adverse changes to their Will.
The Right People in Key Roles
The roles of executor of your Will and your attorney in respect to your Power of Attorney documents are important roles and it is paramount that you appoint trusted people to undertake these roles as essentially you are handing control of your assets to those who assume these roles.
Your attorney is entrusted to look after your finances and provide the best care for you in the event that you become incapacitated so you need to choose wisely.
Communication is Crucial
It is important that there is transparency for you and your family. By having important conversations with your spouse and children you can openly discuss your intentions and expectations so that all parties are relevantly informed and fully understand what your wishes are and what you have put in place.
In order to evaluate the best options for you it is important that you obtain the appropriate professional advice to determine which is the best strategy for your own individual circumstances so that the relevant documents are put in place which offer you the best asset protection possible.
Melisa Sloan is principal of Madison Sloan Lawyers and author of Big Moments: Expert Advice for Conquering those moments that define us. www.melisasloan.com.au
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