Late-in-life marriages worry heirs

Prenups aren't foolproof, though, particularly when it comes to qualified plans like 401k's. When one spouse dies, his 401k plan will automatically go to his spouse regardless of what the couple's prenup says. That means if his will and prenup stipulate that all his assets go to his children when he dies, his wife will still inherit his 401k. The only way around that is for his new wife to sign a waiver to disclaim the 401k.

Trusts

Often there's a question of how a surviving spouse will be supported when his or her partner passes away. Trusts can be used to make sure that there's a steady flow of income but that the estate will eventually pass along to the descendant's children.

The idea behind trusts, says Davidow, is to protect children from the previous marriage but use the assets to maintain the lifestyle and health care needs of the surviving spouse.

A couple can stipulate in a trust agreement that at the husband's death his wife will use a certain amount of his assets to live. And at her death, the trust will be terminated and the assets go to the husband's children.

The trust, created through a prenup or will, is often important when one spouse gets sick and needs expensive medical care. "The law says you have a legal obligation to support your spouse for 'necessaries,'" Davidow says. That includes health care, something you can't contract out with a prenuptial. So if one spouse gets sick and can't afford treatment, the other spouse is obligated to pay. (Paying $100,000 a year for a spouse's nursing home stay is a drain on anyone's assets.) Davidow recommends his clients also purchase a long-term-care insurance policy so there won't be a threat to either's estate.

The family home

When Judith Ludwig's 64-year-old father got married to his second wife, he moved into his new wife's home in Florida. Ludwig was concerned, however, that there was no provision for what would happen to her father if his new wife died first. Ludwig, a CPA and certified financial planner in Newton, Mass., feared that if her stepmother died first, her children would be tempted to sell the house. And where would that leave her father?

"When I brought it up she was really mad at me," Ludwig says of her stepmother. "But the reality is that when a parent dies, you want your money. It sounds coldhearted, but it's true."

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A family home is a sensitive issue that can cause problems for both spouses as well as their children. Often when an older couple gets married, one spouse moves into the other's home. Typically, says AARP's Hurme, it's going to be the family home. The question they have to answer is: What will happen to the house when one spouse dies? If Dad's new wife moves in, is the children's expectation that as soon as Dad dies, she moves out? Or will she get to live in the house until she dies, upon which the children inherit the house?

"The greater concern is probably not so much that she gets it," she says. "It's 'We don't want her kids to get it. If she dies, it should come back to our side of the family.'"

If you're worried about the fate of your house -- say a spouse wants the home to revert to his children from the previous marriage for the sake of keeping it in the family line -- don't assume the will is going to take care of it.

If a husband retitles his home by putting his and his new wife's names on the deed, it doesn't matter what the will says about who gets the house: "She's going to get the family home, and that's probably going to upset the kids," Hurme says.

Creating a life estate is a straightforward option, estate planners say. A life estate is essentially a trust with a special provision for the house itself. In it the couple can spell out exactly who gets to live in the house, for how long and who gets it after both spouses die.

The "receiver" of the life estate would be responsible for maintenance of the house; he or she is a beneficial owner and has the right to live there but doesn't actually own it.

This article was reported by Lisa Scherzer for SmartMoney.

Updated Sept. 16, 2009

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