My second husband wants to put our $750,000 home in a trust for his children. Does he have the right?

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My second husband wants to put our $750,000 home in a trust for his children. Does he have the right?

“My personal retirement and savings total $1 million and his savings exceed $3 million.” (Photo subjects are models.) – iStockphoto

Dear Quentin,

My husband and I have been married for 15 years. We get along well with each other’s ****** children, and I believe we have a good marriage. He is 72 and I am 62. We are both retired. He has a lot more money than me in savings and retirement. He has a very good pension, which now supports us. My personal retirement and savings total $1 million and his savings exceed $3 million. My Social Security is $1,655 a month. His pension is about $10,000 a month (not counting his retirement and IRAs).

After I retired I sold my home that we had been living in and it became part of my portfolio. My husband sold his, and he bought a new home for us in his name only. We are both in total agreement that his money and investments would go to his two children and grandchildren and mine would go to my two children.

Most Read from MarketWatchFinalizing new wills

We have not finalized our new wills yet. Our home — or, at least, the house we live in — is worth about $750,000 and has gained over $100,000 in equity. My husband wants to put the house in a trust that states that I could live in it and maintain it for as long as I would like, should he predecease me. Upon my ******, it would go to his children.

He has annuitized a portion of his pension so that it would be possible for me to do this although not with the same income I am receiving now, which is OK with me. If we both continue to live a long life together, this would not be a problem. We are both in fairly good health.

If he were to pass away tomorrow, could I sell our home and buy something less expensive and less expensive to maintain, closer to my children? Upon my ******, would the proceeds of the house go to his kids? Would they have a say in what I did with the house and where I lived? If I did not want to live in that house and maintain it by myself, what are my options short of turning it over to them immediately and using my own retirement money to set up a new residence?

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I am a very independent person, and I don’t want anyone telling me what to do, even my own children. We live in Florida. I want to be fair to everyone. I left a good job that I liked and it would not be possible for me to go back. I really would not want to take money out of my retirement to purchase a new home. This is really causing me a lot of anxiety.

Wife, Mother and Stepmother

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In second marriages, it’s important to make plans and avoid trusting your spouse to pass on your entire estate to your children after you’re gone. – MarketWatch illustration

Dear Wife,

You’re looking at this from the inside.

You need to take off your rose-tinted — or happy marriage-tinted — spectacles, and look at this proposal through the eyes of a lawyer — your lawyer, not one who has been hired by your husband. You would not be permitted to sell this home if it were put in a trust under your husband’s name, especially if his children were listed as beneficiaries and the house goes to them after you both pass away. Your anxiety is not misplaced.

It’s forward thinking of your husband to buy a home for you both to live in for the rest of your lives, put it in a trust and also to deed it to his children. He is also including you in the decision-making process. As letter writers to this column can attest, in second marriages it’s important to make plans and avoid trusting your spouse to pass on your entire estate to your children after you’re gone. Your husband is clearly aware of this. Case in point:

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who sold the family home for $1 million despite her late husband’s wish that she live in the house and, when she *****, pass it onto his children. That’s the kind of outcome you want to avoid.

I have an important question before I dig into the logistics of your husband’s plan. How did he actually pay for this house? Florida is an equitable-distribution state where assets are split in a divorce fairly, if not always equally. If he is using marital funds, the house would remain marital property, and you should not sign anything. “If a particular property or asset was purchased or otherwise acquired (in most cases) during the marriage, it is considered marital property,” says

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, a law firm with offices across Florida. “It does not matter if the property or asset was acquired by one or both spouses.”

“For instance, if a husband purchases a classic car during the course of his marriage to his wife, the classic car will be considered marital property, even if the husband purchased the property with money from his own paycheck and only his name appears on the title, the car is still likely to be treated as marital property,” the law firm adds. “A common myth is that a spouse can protect an asset by keeping it in his or her name. That is not true in Florida.”

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‘Enhancement’ of separate property

Appreciation of separate property can also be considered marital property if a couple divorces. “If a non-marital asset becomes more valuable because of the work of one or both of the spouses or because one or both spouses spent marital funds or assets on improving it, the ‘enhancement’ — that is, the difference between the present value of the asset and the value of the asset prior to the marriage — can be considered marital property,” Ayo and Iken adds. “But it is important to keep in mind there are different rules that look at whether the enhancement was due to active labor, marital money investment, or passive appreciation.”

From what you say, your husband is suggesting giving you a “right to occupy” the home. In that case, you would not have the right to sell the home and, if you decided to move, the trust would treat this as if you had *****, sell the home and divide the proceeds between your stepchildren. Depending on the terms, the trust could allow you to downsize, but the money made on the transaction goes directly to your stepchildren. Or your husband could stipulate that you receive any appreciation on the value of the house while you live there, if you decide to move.

The trust could also stipulate your home as a “life estate,” providing you with the right to own the home for the rest of your life, whether or not you physically occupied the property. You could live in it or rent it out to use as income during your retirement. Couples in your situation can also plan ahead. It seems too late in your case, but your husband could have provided you with a term life-insurance policy. If he ***** within a certain designated ******* of time, you would receive a lump sum in cash. He could pay a premium for that ******* of time, typically anywhere between 10 and 30 years. Still, you both have healthy retirement incomes.

This is all minutiae compared to the ******* issue. What funds did your husband use to purchase this house and does he have the right to make sure the entire property goes to his children? Consult a lawyer before you finalize your new wills. I don’t recommend you use the same attorney; you should have a lawyer who can represent you and, at the very least, go through your options and rights before you sign a postnuptial agreement or a new last will and testament. Depending on what money he is using to buy this house, it may be that you will have to agree for this property to be excluded from your ******/marital assets.

Be careful before signing any document you do not understand.

Previous columns by Quentin Fottrell:

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