Estate Planning Issues That Arise When a Couple Gets Married Later in Life Bringing Children and Assets into the Marriage

It's common these days for two people to get married later in life after getting either divorced, or outliving their first spouse. It's also common for those spouses who get married later in life to have adult children, and they also often bring significant assets into the marriage. This post addresses some of the estate legal issues that are involved when spouses get married later in life.

When no advance legal planning is addressed prior to the marriage, problems often arise after the death of one of the spouses. It's common for there to be confusion regarding who owns the marital assets. Do they belong to the husband? Do they belong to the wife? Which assets are community property? Is there any community or separate debt? Are there any reimbursement issues? These problems get compounded when the people having the discussioin/argument are the surviving spouse and the children of the first spouse to die.

Basic Louisiana community property law dictates that anything acquired during the marriage through the effort or skill of either spouse is community property. Some spouses mistakenly believe that if these "earnings" remain in the name of the spouse who earned them, then those assets would remain the separate property of that spouse.

Basic Louisiana community property law also dictates that the natural and civil fruits of the separate property of a spouse are community property. Again, many spouses mistakenly preseum that if a spouse has "separate" investments, then the interest and dividends that those "separate" investments produce must be separate property - not so.

Some spouses, particularly those with income producing assets, will sign a declaration reserving the fruits of their separate property as separate property. But this cannot be done without their spouse knowing about it. A copy of the declaration must be provided to the other spouse, and the declaration must be filed in the appropriate public real estate records.

Many couples who get married later in life, each of whom has children of their own, and each of whom have significant assets they want to "protect," sign a matrimonial agreement, also known as a "pre-nup," "marriage contract," or "separate property agreement." Couples who do this typically attempt the modify the default community property rules that exist in Louisiana when a matrimonial agreement is not in place.

Many matrimonial agreements provide that each spouse will have their own separate assets and debts, and there will be no community property. This can make it easier to determine "who owns what" when one spouse dies. When done right, there are no community property issues, community debt issues, reimbursement issues, or other claims that the estate of the first spouse to die might have against the surviving spouse. These agreements are typically signed by both spouse prior to the marriage, and they must be recorded in the appropriate public real estate records.

And then the next issue that must be addressed after the above is addressed is: How to leave our respective estates to each other and our children or other heirs - the will and trust discussion.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

Phone: (225) 329-2450

How To Keep Your Sons-In-Law and Daughters-In-Law Out of Your Estate

It's common for parents to want to keep their sons-in-law and daughters-in law out of their estate, for a variety of reasons. Common reasons include the fact that the in-law spends too much money; the in-law has their own kids; the in-law will inherit from their own parents and grandparents; some parents want to keep everything in the "bloodlines" because they inherited from parents and grandparents; others just don't like their in-laws; and others fear that their children will get divorced in the future and lose their inheritance.

Parents have several options when establishing an estate legal program. One option is simply leave the inheritance to the child - outright. Some parents reason that an inheritance is the separate property of the child so that should take care of it. However, inheritances that children receive are often, either intentionally or unintentionally, commingled with community property causing the inheritance to lose its separate property status.

A second option parents have is to leave their child's inheritance to a trust for the benefit of the child. If the parents name the child as the trustee, the child's spouse could exert influence over the child and force the child to take excessive distributions from the trust. But some parents tell me, "Let's leave it to a trust for our child and name our child as the trustee. If our child screws it up, so be it. We did what we could do to try to protect him without taking away his access to his inheritance."

A third option is to leave your child's inheritance to a trust, but name a 3rd party as the trustee of the trust - in essence restricting your child's access to his or her inheritance. By restricting your child's access to the trust, your are restricting your child's spouse from influencing your child to access the trust. You may even wish to name your child's children as the principal beneficiaries of the trust so that when your child later passes away, remaining trust assets would stay in the bloodlines benefiting your grandchildren. Your child's withdrawal or distribution rights become key components to this program.

There are many factors that play into how you leave an inheritance to your children. You must factor in the Louisiana community property law, the Louisiana Trust Code, laws which state that fruits of separate property are community property, family law, marriage contract law, and laws allowing spouses to sign a Declaration reserving the fruits of separate property as separate property.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Louisiana Estate Planning Attorney
Phone: (225) 329-2450

6 Critical Estate Planning Concepts: How To Make Your Child's Inheritance Divorce-Proof

I was working with a couple from St. Tammany Parish. They had only one child. It appeared to this couple that their child would likely get married in the next few months or years. The couple was not particularly fond of their potential daughter-in-law, but like they told me, "We don't get to select who our son marries!"

The couple had worked very hard to save up their estate. They wanted to pass it along to their son - AND THEIR SON ONLY. They feared leaving their estate to their son one day in the future, and then the daughter-in-law divorces the son and takes half of the inheritance along with her. They owned a home and another piece of property. They owned publicly traded stock, and they owned a considerable amount of cash, in the form of checking accounts, savings accounts, money market accounts, and certificates of deposit.

Here are a few things you should know if you want to keep your children's inheritance in the family and avoid losing it to your children's past, present, and future divorces.

  1. Inheritance is Separate Property. At the moment that a child (or anyone) inherits, that inheritance is the separate property of the person inheriting. So, if parents leave Son $1 million, then that $1 million initially is the separate property of Son's - not community property of Son and Daughter-in-Law.
  2. Income From Separate Property. Income produced by the separate property of a spouse is community property. So, if that $1 million that Son inherited produces $200,000 of income (interest and dividends) over a several year period, then that income that Son's separate property produced is community property owned by both Son and Daughter-in-Law.
  3. Commingling of Community and Separate Property. If community property and separate property get mixed up together so that you can't distinguish the separate property from the community property, then it all becomes community due to our presumption that anything a married couple has is community property.
  4. Declaration of Paraphernality. Son may sign a particular type of Declaration reserving that the fruits and revenues (income) of his separate property IS his separate property. Assuming he executes this document timely and accurately, then the $200,000 of income that his inheritance produced (See #2, above) would be his separate property. There would be no commingling of inheritance and income from inheritance, so the separate property status of all of it would be preserved.
  5. Leaving an Inheritance To Your Ex-Inlaw. Let's say your son is divorced from the mother of your son's three minor children. Your son predeceases you. It is likely that the inheritance that your son would have received would go to your son's children (your grandchildren). But guess who controls it? Yep, you've just put all of your hard earned wealth into the hands of your deceased son's ex-wife, because the courts will put her in charge of your minor grandchildren's inheritance, causing you to "roll over in your grave." Proper estate planning, done right the first time, with the right estate planning attorney, can avoid these problems.
  6. Leave It To "The Son Trust." For parents who want their children to have an extra layer of protection, they will set up their estate planning legal program in a manner that when the parents die, the child's inheritance will be placed into a trust for the child. Done correctly, this may prevent the child from being "influenced" by the child's spouse to do something inappropriate with the inheritance, and it may even provide that when the child later dies, any remaining inheritance in the child's trust will pass along to the child's children - and not the child's spouse or ex-spouse.