Senior couple and family members gathered around dinner table
Senior couple and family members gathered around dinner table

Estate Planning for a Surviving Spouse’s Remarriage

As the estate tax exemption has grown dramatically, from $600,000 in the 1990s to $13,610,000 in 2024, many families who are building or managing substantial wealth are less concerned with estate taxes than they used to be, and some of the traditional estate tax based reasons for using “credit shelter” trust planning for married couples have faded.

Nonetheless, taxes aren’t the only reason to use trusts. One of the most significant non-tax reasons to use a trust is planning for a surviving spouse’s remarriage.

What are the risks to family wealth when a surviving spouse remarries, and how can using a trust (and designing that trust thoughtfully) reduce them?

Asset Leakage to a New Spouse

Most states (including Ohio, Kentucky, and Indiana) have “elective share” statutes buried deep in their probate statutes that allow a surviving spouse to “elect against” their deceased spouse’s will, and instead receive between one-third and all of the deceased spouse’s probate estate.1

Elective share statutes can cause problems when a trust wasn’t part of the estate plan, because the surviving spouse might get remarried, without getting a prenuptial agreement.

If your spouse has inherited outright from you, and doesn’t get a prenuptial agreement before remarrying, and their second spouse survives, the second spouse has strong economic incentives and the legal right to divert between one-third and one-half of the inheritance your spouse received from you away from your descendants.

If that doesn’t sound like a good outcome to you, you’re not alone.

Placing a spouse’s inheritance into trust solves the elective share problem, because assets remaining in the trust at your spouse’s death won’t be included in your remarried spouse’s probate estate – the asset “bucket” that’s vulnerable to the elective share statutes.

A Surviving Spouse as “Gold-Digger’s” Target

When a substantial inheritance is held in trust, it’s much easier for a surviving spouse to be more confident that a suitor is interested in him or her, and not their wealth.

It also makes it much more likely that relationships among a surviving spouse, his or her children, and their new stepparent won’t be strained by fear of disinheritance.

New Half-Siblings

If a surviving spouse has or adopts additional children, the new spouse is likely to seek ways to increase inheritance for those children at the expense of their child’s half-siblings.

Using a trust is a first step to protect the long-term flow of wealth to descendants even if a spouse remarries, but it shouldn’t be the last.

How the trust is designed can be just as (or even more) important. Trust design issues to consider carefully include:

Who Should Control the Funds?

If your surviving spouse is trustee of the trust when he or she is remarried, practical risks present themselves. Will the new spouse encourage your surviving spouse to be (overly) generous in distributions? It’s not unlikely.

A simple solution to this potential problem is to provide for a corporate trustee like First Financial Bank to serve as trustee (or as co-trustee, alongside the surviving spouse).

Should a Spouse’s Inheritance Provide “First” or “Last” Dollar Spending?

Most married couples want a surviving spouse to be provided for as generously as possible, and of course this instinct makes sense.

But if a spouse remarries a wealthy person (or a person who likes the finer things in life), should generous distribution standards in a trust directly or indirectly subsidize an enhanced lifestyle for the new spouse?

Will generous distribution standards allow rapid depletion of the trust, and accumulation of wealth outside the trust – wealth which might pass to the new spouse, or to new children?

To reduce these risks, a trust could provide that the spouse himself or herself couldn’t be trustee, and that the successor trustee should consider the availability of other assets and income available to support the spouse when making distribution decisions.

What Control Should a Spouse Have Over Ultimate Flow of Trust Assets?

Trusts often include powers of appointment allowing a beneficiary to direct the distribution of remaining trust assets when the beneficiary is no longer living.

When narrowly drafted, powers of appointment often limit the “permissible class” of appointees to the descendants of the person whose wealth funded the trust. More broadly drafted powers of appointment may permit assets to be appointed not only among descendants, but to any person or entity.

When a surviving spouse remarries, broadly written powers of appointment can lead to unintended consequences and discord.

For instance, a surviving spouse allowed to appoint trust assets to any person or entity certainly might direct them away from descendants in favor of a new spouse, or to additional children, or to a new spouse’s children.

Although they may not provide a perfect solution, one way to reduce risks relating to powers of appointment held by a surviving spouse is to limit potential appointees to descendants and/or charities. In addition, at any time after a spouse has remarried, the spouse may only appoint to descendants, rather than to any person or entity.

Remarriage of a surviving spouse may not be a topic spouses want to discuss in depth. Nonetheless, for many families, a thoughtful discussion with advisors about the family’s situation, concerns, and objectives with appropriate follow-up drafting (or revisions) for a trust can provide worthwhile and substantial returns over the long term. The potential payoff will be realized in greater family cohesion and harmony, and safe delivery of a family’s assets where family members most want them to go.

1 See, e.g., ORC 2106.01 and ORC 2106.05 (Ohio); KRS 392.020 (Kentucky); I.C. § 29-1-3-1 (Indiana).

The information on this page is accurate as of January 2024 and is subject to change. First Financial Bank and Yellow Cardinal Advisory Group are not affiliated with any third-parties or third-party websites mentioned above. Any reference to any person, organization, activity, product, and/or service does not constitute or imply an endorsement. By clicking on a third-party link, you acknowledge you are leaving First Financial Bank and Yellow Cardinal Advisory Group are not responsible for the content or security of any linked web page. Member FDIC / Equal Housing Lender


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