A NOTE TO READERS: The following article is a drastically rewritten and updated version of an article prepared by Bob Mason six years ago. This article is to be published soon in the Winter 2018 edition of the NC State Bar Journal and has been written for other attorneys (thus the references to “your clients”). Also, the NC State Bar Journal version of this article contains numerous citations to North Carolina law that have been omitted below.
Tying the Knot? Or Just Moving In?
When a client tells me that he or she is considering a second marriage, for terribly unromantic reasons (I guess I’m the anti-cupid…darn lawyer!) I recommend that the client plan carefully—very carefully—before going into a later-in-life second marriage. The religious prescription not to enter a marriage “unadvisedly or lightly” applies in spades to a later marriage.
“Bob,” a client once asked, “are you suggesting we see an attorney before the preacher?” My answer: “Yes.”
Some of the biggest and most expensive messes (I like the term “elder law train wreck”) I have had to clean up have been after the death of a second spouse when there had been little or no advance planning.
Adult step-siblings (who may not even know or like each other) can be counted on to be looking out for whatever it is that they believe their natural parents accumulated for them.
Most “planning” I have seen of late-marriers (is that a word?) consists of simple verbal agreements to the effect of “what is yours is yours, and what is mine is mine.” Lawyers know that won’t cut it. Most of the following difficulties can be addressed with a well-drafted prenuptial agreement.
All couples are different, but here is a partial list of issues that may be important to consider in further detail.
Intestacy and Poorly Planned Testacy.
As attorneys we might question the sanity of any couple that enters into a late marriage with no wills. It happens. The North Carolina Intestate Succession Act provides that a surviving spouse is entitled to a share of real and personal property of a deceased spouse depending upon how many children (and other descendants) survive the deceased spouse (and whether any parents survive – but since we’re discussing late-in-life second marriages, I’ll assume there are no surviving parents). If Dad dies intestate survived by his “precious bride” (Dad’s term of endearment) of just a few years she will take the first $60,000 of his personal property and take either one-half or one-third of everything over $60,000 depending upon whether Dad is survived by just one or more than one child. If Dad had any real property, the “evil witch” (that according to Dad’s surviving relations) will be entitled either to half the real property (if Dad is survived by one child) or to one-third (if Dad is survived by more than one child).
Fortunately, the right to an intestate share is waivable.
But perhaps love truly is blind, and the newlyweds have downloaded snazzy, but simple and inexpensive, “I love you wills” that leave everything to the surviving spouse with the understanding that she or he will “do the right thing.” The prior-marriage-children can be your clients if you’re a litigator.
Even with wills that leave everything to the children of the deceased spouse, there may be problems with an “elective share” statute.
Elective Share and Year’s Allowance Statutes
Like most other states, North Carolina has an “elective share” scheme. The elective share statute enables a surviving spouse to “elect” to receive a share of the deceased spouse’s estate, the size of which depends upon how long the couple were married. A marriage of less than five years entitles the survivor to a total of 15% of the deceased spouse’s estate (for example, if Hilda left Henry $10,000 pursuant to the terms of her will, but had an estate of $1,000,000, Henry could elect another $140,000). After five years, the percentage pops to 25% of the estate, then to 33% after ten years and to 50% after fifteen years.
In fact, one interesting South Carolina case made waves a few years ago.
The deceased owner of Hooters (you know, the restaurant famous for . . . large burgers and chicken wings) left $1 million a year for 20 years to his quite younger surviving spouse. She felt $20 mil wasn’t enough, so she elected for 1/3 of Mr. Hooter’s estate. Mr. Hooter’s son (not the widow Hooter’s son, by the way) objected and claimed the South Carolina elective share statute (which is similar to North Carolina’s) is unconstitutional. Yours truly believes that argument had as much chance as a Hoot Owl in, well, Horry County. Hooter, Jr. and the widow Hooter settled for an undisclosed sum.
Notwithstanding the right of an elective share, a surviving spouse is entitled to a “year’s allowance” of $30,000 “off the top” of a deceased spouse’s estate. In other words, a surviving spouse is entitled to this subsistence-type allowance before any other creditors or heirs. This right, too, is waivable in a prenuptial agreement.
Powers of Attorney and Health Care Advance Directives
Effective January 1, 2018, North Carolina has a new power of attorney statute. Certain prohibitions on gifting, beneficiary designations, and the like make exceptions for spouses and children. Powers of attorney are not “just forms” (although many tend to treat them as such). In the case of a late marriage, powers of attorney and the powers granted (or withheld) in such an instrument under the new statute should be carefully considered.
The subject of health care decision-making can cause a bit of squirming for the happily engaged couple, especially after I explain the “default rules” that apply in the absence of a valid health care power of attorney. In the absence of a guardian of the person or a valid health care power of attorney, the spouse stands atop the heap of decision-makers, followed by the children of the principal. This may not go over well with Mom’s children given that the loser she’s marrying has had three earlier wives pass away under less than clear circumstances.
The Family Home.
Naturally the newlyweds do not want to see the bride or groom evicted upon the death of the other. On the other hand, children can become quite emotional over what may be perceived as “their home.” Chances are . . . putting the house in both spouse’s names is not a good idea. Read this for a very scary story (based on Mason Law facts). Try a life estate, or maybe a trust.
Social Security Benefits.
Remarriage can affect the Social Security benefits a newlywed had been receiving under a deceased or divorced spouse’s account. If you divorce after 10 years or more of marriage, you can collect retirement benefits on your former spouse’s Social Security record if you are at least age 62 and if your former spouse is entitled to or receiving benefits. If you remarry before age 60, however, you generally cannot collect benefits on your former spouse’s record unless your later marriage ends (whether by death, divorce, or annulment).
Annuities and Survivors Pension Payments.
Your client might be kissing a hefty survivor’s pension (corporate or military) goodbye when he or she kisses a new spouse. Advise checking those out before heading to the altar.
Income Taxes and Transfer Taxes.
There may be some tax planning advantages to marrying if estate and gift taxes are a concern because many planning techniques are available to married couples only. On the other hand, if their estates are large enough to pose transfer tax issues after the recently enacted Tax Cuts and Jobs Act ($11.2 million for an individual and $22.4 million for a married couple) any planning should be undertaken by sophisticated trusts and estates counsel.
Income taxes might also drop if one spouse is earning significantly more than his or her new spouse.
Long Term Care (Nursing Home) or Medicaid Planning.
This is a big consideration for older people considering remarriage. Medicaid rules and regulations do not recognize any plans or promises a couple has made in a prenuptial agreement when it comes to Medicaid and nursing home benefits. A carefully drafted prenuptial agreement is worthless if these issues arise. All Medicaid programs consider the assets of the couple. While rare, some couples have divorced within a few years of marriage when one spouse in declining health (usually the “poorer” spouse) has entered a nursing home.
It may be sad to see, but some couples are electing to do exactly what they would have DIED seeing their children do 30 years ago . . . “living in sin.”