“Most people getting remarried have little to no concept of the full legal impact of their new marriage”when it comes to estate planning, asserts John Scroggin in the Journal of Financial Planning.

Scroggin points out two widely held misconceptions:

  1. Prenuptial agreements are needed only by the wealthy.
  2. Spouses in second marriages (particularly where there are children from a prior relationship) should have only limited rights to the assets of the new spouse.

In reality, he explains, prenuptial agreements are very important.  On the other hand, even when a prenuptial agreement exists, certain aspects of the law override that agreement, granting the new (second or third marriage) spouse certain rights and obligations.

 Spousal share
If not waived in a prenuptial agreement, a surviving spouse has a legal claim against a portion of the spouse’s estate, and that claim has priority over the bequests made in the will (very much like the claims of a creditor).

Qualified retirement plans 
Upon marriage, a spouse automatically becomes the primary beneficiary of the other spouse’s ERISA retirement account. Pre-retirement, neither spouse can choose otherwise without the other’s consent. In an annuity payout, the form of payment must be a joint and survivor annuity.
If a spouse wishes to leave his or her qualified retirement plans to a beneficiary other than the spouse, the prenuptial agreement should address this issue and provide that the spouse agrees to execute a consent to allow a different beneficiary on the plan.

Filial Support
While generally, no individual can be held liable for the debts of another person without having agreed to that liability, Indiana is one of the states where there are filial support statutes.  That means family members can be held legally liable for the support obligation of spouses, including health care and long-term care costs.  Failure to provide the necessary support to a spouse can be a criminal felony or misdemeanor. This law holds true even when a prenuptial agreement is in place!

Incapacity decision-making
In the absence of a power of attorney appointing a different decision maker, the current spouse has the highest priority to serve as a guardian over the assets and over the person of an incapacitated spouse.

Medicaid claims

Qualifying for Medicaid benefits will mean that the joint assets and income of a married couple are taken into account. Even if there is a prenuptial agreement providing that certain spousal assets are separate, married couples may need to spend down both spouses non-exempt assets before either spouse can qualify for Medicaid.

Premarital or prenuptial agreements specifying the division of assets and debts in the event of divorce, incapacity, or death are crucially important for people entering a second or third marriage with assets from a prior marriage.

Some might agree with Frank Sinatra that “Love is lovelier the second time around,” but here at Geyer and Associates, we know, it’s also more complicated!