For baby boomers getting remarried, there are several financial
issues to consider that younger couples do not usually face –
especially as it relates to estate planning.
It is often the case that estates are left first to the
surviving spouse (especially for first marriages), and then
subsequently to any children of the marriage. This is a routine and
tax efficient course of action. However, if there are children to
consider from a previous relationship then such decisions can
become complicated. In these scenarios, it is necessary to move
beyond a "standard" tax efficient plan. In a second
marriage, a possible glitch that can occur is when an estate is
left entirely to the spouse (thus allowing for a tax deferral), and
he/she neglects to provide for the children from a previous
marriage (or to their bequests). Therefore, the children may be
left out of the estate entirely.
To prevent this from happening, you can create an alter ego (or
joint-partner) trust that would allow you and your new spouse to
receive the benefits and income of your assets while you live.
Meanwhile, you can name your children as the ultimate capital
beneficiaries upon the death of both spouses. If properly enacted,
this structure is better than specific bequests to your children in
your will because of the added benefit of deferring taxes until the
death of both spouses, and avoiding probate fees (on the assets
placed within the trust). This structure is only available if the
"settlor," (the person who is transferring the assets) is
65 or older.
Upon the death of a spouse, the surviving spouse may opt to
receive their entitlement under the existing will, or they may
elect in favour of equalization of net family property under the
Family Law Act (FLA).
When opting for the FLA election, then arises yet another
complication for silver newlyweds. Electing under the FLA is
similar to the entitlement which the surviving spouse would have
received had the spouses separated. Stated simply, equalization
allows for a surviving spouse to receive half the combined net
worth of both spouses with some possible adjustments. These
adjustments would allow the estate and the surviving spouse to
deduct the assets that each spouse had contributed to the marriage.
These include the equivalent worth of what each had on the first
day of marriage with the possible exception of the family
'matrimonial' home and excludes any gifts/inheritances
received during the marriage (as long as they have been kept
separate and are identifiable).
Notwithstanding a long and happy marriage, (and an otherwise
well thought-out estate plan), the surviving spouse could
circumvent the planning and potentially receive a larger share of
the estate than was contemplated under the will. The FLA election
(which can be made up to six months after death) prevents any
interim distributions from the estate of the deceased spouse
without the surviving spouses' consent (or as authorized by the
In order to avoid the possible complications that may arise with
a FLA election, a couple may want to enter into a marriage
contract, known as a prenuptial agreement. This contract can set
out what the specific entitlements of each spouse will be upon
separation (or death of the other spouse). As such, if the marriage
contract is written in harmony with (to mirror) the estate
planning, then it should be possible to prevent differences in
entitlements between the estate plan and the FLA election.
Proper planning can allow you to minimize and defer tax,
streamline the resolution of your estate, and ensure your final
wishes are carried out.
About the Author
Mitchell Ornstein is a manager in Crowe Soberman's
Valuations | Forensics | Litigation Group. He is knowledgeable in a
wide range of business and intellectual property valuations,
securities valuation, shareholder disputes, family law matters, and
The content of this article provides a general guide to the
subject matter. Specialist advice, including that from a lawyer who
practices in family law, should be sought about your specific
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It is not uncommon for parents to provide monetary gifts to their adult children. Parents may wish to help their child with a down payment on a property, or help pay out their child's existing mortgage.
On March 31, 2014, BC's new Wills, Estates and Succession Act1 ("WESA") will come into force. WESA introduces new protections for beneficiaries of estates that are in danger of being disputed or deemed ineffective by a court.
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