Recently I attended a wedding. At our table, two of the four couples were widowers or widows who had re-married after the death of their first spouse. Since both widowers were former estate planning clients and only one had consulted with me about revisions to his Will in light of the second marriage, I wondered how often this occurs.
Second marriages, particularly when both spouses have children from their first marriage, presents unique and difficult challenges. Generally, both spouses want to make sure the survivor is adequately provided for during the remainder of their life. However, they also want to make sure their children receive any remainder. There are solutions to the problem, but they require a comprehensive estate plan.
The problems that arise from failing to get competent estate planning advice are illustrated by the recent decision in In Re: Estate of Harold E. Root, Deceased, No. 1684 MDA 2014, decided August 28, 2015 by the Pa Superior Court.
Mr. Root was married Twenty-Seven (27) years to his second wife. He had two (2) children from a previous marriage. He opened two investment accounts utilizing the “payable on death” options naming his children as the beneficiaries. After his death, his wife exercised her right to elect against the Will and wanted to include the investment accounts. His Will left the second wife nothing. The conventional wisdom in the legal and investment community is that the spousal right of election (which is one third of the estate) applies only to probate assets. The “payable on death” option makes the investment accounts non-probate.
The Decision does not provide any insight into why Mr. Root may have utilized the “payable on death” option, but it is fairly clear he wanted those accounts to pass to his children and not his wife.
Unfortunately for Mr. Root’s children, the Superior Court decided the investment accounts were subject to the surviving spouse’s right of election. Therefore, his second wife received one third of the account.
The Decision emphasizes the importance of not necessarily relying upon what appears to be a simple solution to a complex problem and making sure you know the impact of your choices.