Inheritance questions tend to be easy when you've been married only once. If you die first, your assets—whatever they are—usually go to your spouse. If you have children, you divide the money among them equally. Unequal inheritance sometimes makes sense. For example, you'd leave more to a child who's disabled. But for the sake of future family harmony, equal amounts work best.
If you enter into a second marriage, however, the choices get harder—especially if you remarry later in life. How much, if anything, do you want to leave to your new spouse? If you own the house, does he or she stay in residence if you die first? In long second marriages, do you leave anything to stepchildren?
If you avoid making these kinds of decisions, state and federal laws decide where your money goes. Your second spouse typically will be able to claim one-third to one-half of the assets covered by your will, even if it says something else. Joint bank or brokerage accounts held with a child will go to that child. Your IRA will go to whomever you've named on the IRA's beneficiary form, leaving your new spouse out.
If you want some other arrangement, you and your spouse must have a written prenuptial (or postnuptial) agreement that meets your state's inheritance laws. You'll also need to change those beneficiary forms.
Overwhelmingly, the spouse with more assets wants to make sure that the second spouse is provided for, says attorney Shirley Whitenack of Schenck, Price, Smith & King in Florham Park, N.J. That might mean leaving him or her with money that otherwise would have gone to your kids.
Where assets are roughly equal, however, or in a late-life marriage, spouses might choose to put their own kids first and leave little or nothing to their new mate.
Complications arise when you own a house. You might leave it to your kids but give your spouse the right to occupy it for life. In some states, the spouse's right is guaranteed, even if he or she remarries, says attorney Molly Abshire of Wright Abshire in Houston. Before the house can be sold, your new spouse and kids will have to come to some kind of agreement (usually financial).
A risk that might not occur to you is the potential cost of long-term care. In many states, married people have a legal duty to support each other. If your second spouse eventually needs long-term care, his or her assets and yours might be tapped to pay the bills. In Texas, that even includes your own income and IRA, Abshire says. You'll be spending your kids' inheritance on your second spouse's medical expenses.
In other states, however, your personal income and IRA might not be forfeited for a spouse's nursing home expenses. So get good legal advice. You might decide to skip the "I do's" and publicly become partners instead.
These decisions can be tough to make, especially if you and your new beloved find that you don't agree. It's even harder to tell the kids that their inheritance might change. "Often, people freeze and do nothing," Whitenack says. Or they make their plans secretly, figuring "I'll be dead and won't have to worry about it." That's the worst outcome. Be brave. Fess up.
Jane Bryant Quinn is a personal finance expert and author of How to Make Your Money Last: The Indispensable Retirement Guide and Making the Most of Your Money NOW.