Having a good plan also means telling your family about it. Spencer says she knew of a man and a woman who got married, but because it was a second marriage, they hammered out a prenuptial agreement in which each of them would set up a trust that contained the assets they brought to the marriage. The surviving spouse would live off the income generated by those trusts, and when they died, the trusts' assets would revert back to their respective children, essentially returning the property each of them owned before the marriage to their own children.
At least that was the plan. But unbeknownst to the wife of 17 years, the husband took all of his assets-his life insurance policy, his house, everything-and put them in joint tenancy with his children. The result was that when he died, the assets did not go through any will or trust but rather passed directly to the surviving tenants, who were his children. The wife wound up suing, and the estate ended up in litigation.
"The wife didn't know until he died that he'd changed the title on everything," Spencer says. "That's a failed estate plan. When you do a plan and you end up in court a couple of weeks after the funeral, that's a failure."
Spencer says the husband apparently regretted signing the prenup and feared he hadn't made enough provisions for his children. The children are then in the position of having to wait until their stepmother dies before they get their inheritance. Some don't like that, Spencer says.
"Often the motivation for the estate plan comes from the children because they see the scenario where the stepmother or stepfather gets all the assets and forgets about them," he says.
If divvying up the assets of a second marriage weren't difficult enough, it gets even more nettlesome in community property states such as California. In community property states, there's a spouse's "separate property" and there's the "community property," and while a deceased spouse can give their separate property to anyone tshe wants her-like her kids from her first marriage-she can only control half the community property. The surviving spouse controls the other half.
"State law says you can dispose of your half of the community property however you want but you can't control your spouse's half," says Scott Grossman, an estate attorney in Riverside, Calif.
Does the asset distribution always end in tears when a second marriage is involved? Not always, but often, Grossman says.
"Money changes people, in my experience. I can tell you I'm seeing more of these cases as we get to the generation that didn't frown on divorce and remarriage," Grossman says.