Nobody said that marriage was easy, especially not the second time around when one or more partner has children from a previous marriage.

Often, people enter into a second marriage later in life, when they are more settled in their lives and when they have more assets to their name. Speaking with a qualified estate planning attorney can help you sort out property distribution after you pass.

See related: Estate Planning for Blended Families

Community Property vs. Separate Property

Arizona recognizes two types of property for married couples, community property and separate property.

Community Property

Community property is sometimes known as marital property. This is all assets and property acquired by the couple while they are married. It includes:

  • Income earned by either spouse;
  • Property, including houses, vehicles, and other personal property, purchased with income earned during the marriage; and
  • Property the couple agrees is community property

It is important to note that debts are also considered community property if they are incurred during a marriage. This means that creditors of one spouse can seize community property assets owned by both spouses. This is different from common law states, where creditors can only seize property owned by one debtor.

Separate Property

On the other hand, separate property is everything else. It typically includes:

  • Real property and personal property owned before the marriage;
  • Inheritances or gifts received by one spouse either before or during the marriage that were intended to go to one spouse only; and
  • Property the couple agrees in writing is separate property

Default Distributions after Death

Arizona law sets out what happens if you die without a will (also known as dying intestate). The order of distribution in the law may not reflect your wishes.

Under Arizona’s intestate laws, when one spouse dies:

AND has children together with the surviving spouse, the surviving spouse inherits all of the deceased spouse’s separate property and keeps all of the surviving spouse’s interest in the community property.

OR

AND has children from a prior marriage, the surviving spouse inherits 50% of the deceased spouse’s separate property and NONE of the deceased spouse’s interest in the community property.  The deceased spouse’s entire interest in the community property is inherited by the deceased spouse’s children from a prior marriage.

This distribution recognizes potentially conflicting interests between your new spouse and children from a former marriage.

Real Property

One of the questions that a couple entering into a second marriage may face is where they will live. It is common for one spouse to move into a home that was purchased by the other spouse before the marriage. After the property-owning spouse passes, Arizona’s intestate laws would give half the property to the spouse and half to children from a former marriage.

However, this can create discord if both parties want exclusive use of the property, or if one party cannot afford to buy out the other party’s interest in the property.

There are different ways to handle the house.  A Trust or a Will can protect the non property-owning spouse.  The property owning spouse can beneficiary designate the house to the non property-owning spouse.  Other options can be customized to the situation by an experienced estate planning attorney.

Personal Property

If you have particular personal property you want to give to particular individuals, you can lay this out in a Revocable Living Trust or Will.  You can also make a list, that is signed and dated, specifying particular items going to particular folks.  This kind of list does not need to comply with community property and separate property laws.

Financial Accounts

When you enter into a new marriage, revisit your financial accounts including retirement plans and life insurance policies. Often, we overlook changing beneficiary designations after they are set, even though our life circumstances change. You may discover that your former spouse is still listed as the beneficiary on these accounts, even though the divorce was finalized decades ago.

Take the time now to list either your children, new spouse or Revocable Living Trust as a beneficiary of the account, to ensure the funds go where you want them to.

Other Considerations

Finally, when you are discussing your estate plan with your new spouse, be sure to revisit your power of attorney designations. These are invaluable directives that can ensure you are comfortable and taken care of if you become incapacitated in the future.

You and your spouse may maintain separate bank accounts, but you may decide to grant a financial power of attorney in each other’s favor so that you both can withdraw funds from your account and pay bills in your name.

Everyone will have a different idea of what is fair, depending on their point of view. It is valuable to have honest conversations with your spouse when you make long term plans. An experienced estate planning attorney can help you decide what the best solution is for your family, so that your estate plan will align with your wishes.

To schedule a free consultation, contact the Law Offices of Paula Hannah, PLC today.