The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants

The Kids of a New Spouse

Dr. David Edward Marcinko MBA CMP™

[Publisher-in-Chief]

Multiple marriages entail interesting estate planning moves. Why? In these days of multiple marriages, doctor clients and others often can get caught between wanting to provide for their children from a previous marriage and their spouse’s statutory inheritance rights. Depending on the state of residence, the surviving spouse may have a statutory right to a specific share of his or her spouse’s estate. But, states define what constitutes the “augmented estate” in different ways. Some fairly sophisticated estate planning may be appropriate.

States Right’s

Inasmuch as spousal rights of election were codified many decades ago when divorce was not a common occurrence, many states’ statutes do not fairly recognize the economics and family dynamics of married individuals who have children from a prior marriage. In some states, a spousal right of election is limited to those assets that pass through probate. In other states, the right of election is enforceable against not only probate assets but certain assets, such as jointly held property that would otherwise pass via title to the co-owner, gifts the decedent made within a certain time period prior to death, and life insurance benefits. This expanded pool of assets against which the right of election may be assessed is typically referred to as the “augmented estate.” Most states provide that the right of election is charged ratably against the beneficiaries under the decedent’s will and the beneficiaries of any testamentary substitutes.

The UPC

In many states, the same percentage would apply regardless of the length of the marriage. In 1990, the model Uniform Probate Code (UPC) was amended to provide a scaled right of election based on the length of the marriage. It ranges from a minimum of 12% up to a maximum of 50% for marriages of 15 years or more. Only a handful of states have adopted it. Even though the UPC includes pension and profit sharing plan benefits in the augmented estate, the sliding scale is subordinate to federal pension legislation which can result in an inequity in the case of a short-term marriage.

Assessment

While both pre- and post-nuptial agreements can help, life insurance is favored, particularly in the majority of states where it is excluded from the augmented estate. And, in states where life insurance is part of the augmented estate, it could be used to provide the surviving spouse with his or her share, particularly when a closely held business is passed on to children of a prior marriage. Financial planners, doctors and advisors need to be familiar with this area to effectively serve clients.

Note: “Providing for Children from a Prior Marriage: An Estate Planning Entry Point,” George B. Kozol, Journal of the American Society of CLU & ChFC, January 1997, pp. 52–57, American College.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

• PRACTICES: www.BusinessofMedicalPractice.com
• HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
• CLINICS: http://www.crcpress.com/product/isbn/9781439879900
• ADVISORS: www.CertifiedMedicalPlanner.org
• FINANCE: Financial Planning for Physicians and Advisors
• INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
• Dictionary of Health Economics and Finance
• Dictionary of Health Information Technology and Security
• Dictionary of Health Insurance and Managed Care

Filed under: CMP Program, Estate Planning, Financial Planning | Tagged: CMP, david marcinko, Estate Planning, Multiple marriages, physician divorce, Uniform Probate Code, UPC, www.certifiedmedicalplanner.com | 3 Comments »