When Woody and Kate remarry, each with kids from before, default inheritance rules can backfire. If Kate dies first, her assets go to Woody, who might remarry and leave everything to his new wife. Life insurance and brokerage accounts with kids as direct beneficiaries protect against this.
Second marriages when there are kids have several challenges, but when it comes to estate planning, that can result in disaster. Here's an example from a real-life story. Woody and Kate were both previously married. Woody's in his mid-50s. Kate is in her mid-30s. They both have children from a prior marriage. Most people think that in a situation like this, when Woody or Kate die, everything would go to the surviving spouse. Then at the surviving spouse's death, everything would get split up amongst all the kids. That might happen and it might not. For instance, if Kate were to get married again, she might marry someone that was very persuasive and had other ideas about what to do with the money. There are many ways to remedy this problem, but here are just a few. Woody could take out a life insurance policy and only name his children as beneficiaries. He could direct that money come off the top of the estate and go directly to his kids at his death. Another option would be to set up a brokerage account and make the kids the beneficiaries of that account. Woody's kids are about the same age as Kate, so if nothing is done and everything goes to Kate, even if she does plan on giving it to his kids, because of their ages, they could all die about the same time and they would never inherit anything.
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