Florida also has a new equitable distribution statute that went into effect July 1. Even if you own your own house and you marry, your new spouse is entitled to the pay down in your mortgage during the marriage even if you paid it from only your income. And, if the house appreciated they statute gives them an entitlement to that appreciation.
Having already been through a divorce, you are probably more aware than most people how important it is to take your marriage into account when managing your finances, especially your estate plan. It only gets more complicated the second time around, especially if you have children from your first marriage.
It is critical that you begin your estate planning before you tie the knot the second time. If you have already married your second spouse, however, it is still not too late to make adjustments that could save you a lot of trouble in the future – and save your heirs a lot of trouble after you die.
Step One: Basic Financial Housecleaning
Before you take any other steps, the first action you need to take is to inventory your finances, including both assets and liabilities. Assets include real estate, bank account funds, personal property, stocks, bonds, annuities, automobiles, retirement accounts, insurance policies, and other investments. Your liabilities include mortgages, credit card debts, student loan debts, automobile loans, tax debts, etc.
If any of your assets or liabilities are commingled with someone else’s – jointly owned real estate, a joint bank account with your spouse, a residence that was partially paid for by your spouse, a debit or a credit card in you and your spouse’s name – you need to determine how much of it is yours. In some cases, this might not be clear.
If You Die without a Will: Florida’s Intestate Succession Law
If you die without leaving a will or if your will is invalidated, the distribution of your property will be determined by Florida’s intestate succession law. Although the rules for intestacy can get complex, if you leave behind a second spouse and children from your first spouse, your second spouse gets 50 percent and your children from your first marriage divide the other 50 percent.
If You Forget to Update Your Will before You Die
A common probate problem occurs when someone marries a second time but forgets to update their will. This is particularly common when the testator suffers an unexpected and untimely death. When this happens, your second spouse is still entitled to claim 50 percent of the assets in the probate estate. Keep in mind that the probate estate might not include all of your assets.
Florida’s Elective Share Law
Florida’s elective share law allows your surviving spouse to claim 30 percent of your elective estate. Remember that the 50 percent rule stated above only applies to assets subject to probate while the 30 percent election applies to your elective estate, which is conceptually broader than your probate estate. It includes (among other items):
- Your probate assets
- Revocable trusts
- Retirement plans
- Joint bank accounts
- Property held in joint tenancies with third parties
- Life insurance proceeds payable to a third party
Suppose, for example, that your probate estate is worth $100,000, but your elective estate is worth $1,000,000. Since 50 percent of $100,000 is $50,000 but 30 percent of $1,000,000 is $300,000, your surviving spouse would be much better off taking the elective share. Without proper planning, this amount could include assets that you intended your children to receive.
The Florida homestead mandate prevents many creditors from forcing the sale of your homestead after you die. In a nutshell, your residence qualifies as a homestead under Florida law if it is located in a municipality and is less than one-half acre in size (more liberal rules apply to rural residences).
If your new spouse lives at the homestead as a primary residence at the time of your death, he or she can continue living there for life or, alternatively, move out and collect half the value of the homestead. Certain exceptions apply, such as default on a purchase money or home improvement mortgage, or overdue tax debts assessed against the property.
Florida also has a new equitable distribution statute that went into effect July 1. Even if you own your own house and you marry, your new spouse is entitled to the paydown in your mortgage during the marriage even if you paid it down only from your income. If the house appreciated in value, the statute gives them an entitlement to that appreciation.
If you have any joint debts with your previous spouse, you need to take steps to ensure that creditors cannot reach your assets or assets that you have co-mingled with the assets of your new spouse. Creditors are not necessarily bound by the terms of a divorce-related property division agreement that purports to allocate responsibility for joint debts.
Many financial decisions need to be made incident to a second marriage that can affect you and your spouse both before and after you die. Some of the questions you might ask include:
- Should you maintain separate checking accounts, a joint checking account, or both?
- Will you file for income taxes jointly or separately?
- Should you update the beneficiaries of your insurance policies, annuities, and retirement plans?
- Should you revise your last will and testament?
- Should you revise the terms of any trusts that you have established?
- Should you revise the terms of a health care proxy or power of attorney? If you fall seriously ill or lose mental competence, you might not want your ex-spouse making healthcare or financial decisions for you – especially if you are not on good terms with each other.
Prenuptial agreements are not very romantic, but they are sometimes necessary. If you have not yet married again, keep in mind that a valid prenuptial agreement can resolve many of the foregoing problems and uncertainties. You will need to prepare it carefully, however. Although prenuptial agreements are recognized by Florida law, many courts don’t like them very much and look for excuses not to enforce them.
Life Is Uncertain – Take Action Today
The longer you wait to adjust your estate plan, the greater your risk will be. There is no such thing as a cookie-cutter solution; everyone’s finances are different and everyone’s priorities are different. You need professional assistance to devise the plan that is right for you.
Contact the estate attorneys at Beller & Bustamante by calling (904) 288-4414 or by filling out our online contact form. We serve clients throughout the Jacksonville metropolitan area, including St. Johns County (St. Augustine, Ponte Vedra, Ponte Vedra Beach and St. Johns, among others), Duval County, Flagler County, Putnam County, and Clay County.