Originally published in the News Star on Sunday, November 1, 2015.
QUESTION: My first wife died many years ago. I am now married to a wonderful woman. We each have children, but none together. All are grown, some doing better than others. I just want to leave everything to my wife (or she to me) and we’ll split it equally with our children once we are both gone. What’s the simplest way to do that?
ANSWER: I appreciate your good intentions. But they are unlikely to produce good results.
I am not an attorney and you should consult one in the state in which you live. But here are two ways this could play out…
Without a will. My understanding of Louisiana law is that without a will and upon your death, a portion (half) of your assets would pass to your surviving spouse, with the other half passing to your own children, born or adopted. Your surviving spouse would have use (usufruct, as it’s called here) of the assets meant for your children, including the right to spend all the cash, while she is alive and unmarried. And she can do anything she wants with the half she inherits directly from you.
With a simple will. If your children are adults and not disabled, you may leave all your assets directly to your wife in a will. She would then have ownership of 100% of those assets. Then when she dies, the disposition of those assets would depend on what her will said. If she does not have a will, all of her assets will go to her children. Period.
“But what about my half?” you may ask. You no longer have a half. You’re dead. You left your half to your surviving spouse and it became 100% hers.
In this instance, your children get left out in the cold. This makes for some pretty unhappy surviving children and some very tense Thanksgiving meals.
I understand your desire to take care of the woman you now love and to leave a legacy for your children. But you need to understand these are competing desires and may conflict with one another. That doesn’t mean you can’t accomplish both, but it does mean it is unlikely you’ll do both without being very intentional.
It won’t just happen on its own. Here are some things to consider…
1. Provide for her income after you are gone. If you make sure your surviving spouse has an income sufficient to maintain the lifestyle you both enjoy now, there is less chance she will want or need to spend assets you intend to go to your children.
2. Provide for her care after you are gone. After income, expenses for long-term care in older age are the biggest out-of-pocket drain on assets. Providing for her long-term care in old age will save everyone heartache and possible financial ruin.
3. Direct where you want each dollar to go before you are gone. It is likely you’ll each need to have not only a will, but trusts within your wills. A trust is simply a financial arrangement in which you give the trustee the right and responsibility to hold title over property for the benefit of another (in this case, your surviving spouse and/or children). For example, you might leave money in a trust so that it would provide an income for your wife, but protect the principal for your children.
4. Insure it all happens. You may have plenty of money to make sure all of the above happens, no matter what. Most of us, however, need a little (or a lot) of help. That’s where various forms of insurance can prove helpful. Whether it is use of a guaranteed income annuity to provide lifetime income for your surviving spouse, or long-term care insurance to make sure she’s protected against nursing home expenses, or life insurance to make sure your children get what you want them to have, judicious use of insurance can stretch estate dollars and help them go farther than they otherwise might.
None of this is easy and none of this will do itself. So I suggest you contact both an attorney and a financial advisor to begin the process.
Good intentions are nice. But they are no substitute for a carefully crafted and well funded estate plan.
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Byron R. Moore, CFP® is Managing Director / Planning Group of Argent Advisors, Inc. Email him at firstname.lastname@example.org. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5858. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc. No forecasts can be guaranteed. Argent Advisors, Inc. does not offer tax, insurance or legal advice. The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.