Planning for Second Marriage

Planning:

During the planning discussion Sally indicated her preference was to keep the home she inherited from her mother.  Frank agreed as well because the home is in a very desirable location and can serve as a gathering place for their extended families.  The decision was made to sell Sally’s residence and combine households into Frank’s current home.  The sale of Sally’s home will offer her some liquidity that can be used for her support if something were to happen to Frank.

The 401k beneficiary designation had been setup for his children and it was determined that he wanted to leave it that way.  In the event that something were to happen to Frank, he planned to rework his will, to make a provision for Sally to remain in Frank’s home for the rest of her life, then it would pass to his children upon her death.

From a tax planning standpoint, getting married did not affect Sally’s exclusion for selling her residence.  When her husband died, she received a 50% step-up in basis which along with the exclusion, helped wipe out most of her gain.  Also, since Frank was under the age where required distributions from his 401k begin, he had some flexibility with voluntary distributions toward managing their new combined tax bracket.

Estate planning decisions often have more complications with children from previous marriages. Frank and Sally will need to monitor and seek continued guidance on how financial decisions made jointly would impact their respective estates.