For young couples beginning a life together and getting married for the first time, estate planning may not be a terribly complicated endeavor. With minimal property and savings, simple wills, financial powers of attorney, and healthcare directives may be sufficient planning for the first years of marriage.
It is common for individuals to accumulate significant amounts of property, savings, and investments during their single years. When couples with property beyond the most simple items marry, estate planning becomes much more urgent. It is even more crucial when children are born into the marriage or when entering a second or third marriage.
Challenge Your Assumptions
An all too common mistake that married couples make when approaching estate planning is to assume that their spouses will see things the same way they do. The following questions should be asked of each spouse:
- How do you feel about the necessity of purchasing and maintaining life insurance?
- Do you feel that the other could handle the family finances on their own if either of you were to die or become unable to manage your affairs?
- Who should care and raise your minor children if you die?
- To what extent should the money and property left to each other be protected from future creditors or new spouses?
- Who is best prepared to make end-of-life decisions for you should you become critically ill and unable to communicate your wishes?
- Do you expect that all of your wealth should be left to your spouse?
- Do you want to leave some of your money or property to aging parents, children from another marriage, or to a charity or other cause that is important to you?
- How should your property be left to your spouse or your children and grandchildren? Should these individuals inherit the money and property outright (no strings attached), or should the inheritance be left to your spouse and loved ones in trust (with specific instructions as to when and how the inheritance is to be used)?
The answers to these questions regularly surprise couples. If you are unsure of how you or your spouse would answer these questions, now is a good time to discuss them. Couples who communicate and challenge their assumptions will be far better prepared to successfully complete their estate plan.
Joint or Separate Estate Plans
The decision to jointly engage an attorney to assist you with your estate plan may not be as simple as it would seem at first blush. Depending upon your circumstances, it may be advisable for a couple to engage separate legal counsel to assist with the estate planning process. If any of the following circumstances apply to you, you should give serious thought to hiring separate counsel for your estate planning:
- Do you or your spouse have children from a prior marriage or relationship? If yes, is there any tension between you and your spouse when discussing how you would want the accounts and property divided upon the death of one or both of you?
- Did one of you bring far more money or property into the marriage?
- Do you and your spouse have very different ideas about philanthropic goals in your estate planning?
- Have you and your spouse entered into a prenuptial or postnuptial agreement?
- If you have a prenuptial or postnuptial agreement, do you now want to change the terms of that agreement through an amendment or through your estate plan?
Elective Share Laws
It is important to understand that even if you do separate estate planning with your spouse, the United States has elective share laws designed to ensure that a married individual cannot completely disinherit a spouse or minor child from another marriage. The reason for these types of laws is that traditionally, lawmakers felt that these family relationships deserved protection from financial ruin by individuals who perhaps would unwittingly or unwisely attempt to disinherit a spouse or child dependent upon that individual for support.
These elective share laws are designed to allow a disinherited spouse or child who is still dependent upon the deceased individual to legally claim a percentage share of the individual’s accounts and property regardless of what the will or trust provides.
If you have agreed as a couple to leave your entire estate to someone other than the surviving spouse, you will likely need to sign a prenuptial or postnuptial agreement in which the disinherited spouse waives elective share rights. Such a waiver must meet certain requirements to be valid, which can vary by state. For example, most state laws require that the disinherited spouse must have been represented by independent legal counsel when negotiating the waiver.
Unmarried Couples
Marriage today is less common than it was a few decades ago, with more couples choosing to live together without the legal consequences of marriage. If you find yourself in such a relationship and nevertheless feel committed to your partner, you may be in even greater need of a carefully crafted estate plan, either together with your partner or on your own, depending upon your goals.
In nearly every state, the default laws (intestacy laws) that govern how your property is to be managed if you die without a valid will or trust or are unable to manage your affairs typically do not allow an unmarried partner to receive your property. To ensure that your property passes to your partner, certain legal steps must be taken.You should also consider planning for your potential incapacity and whether your significant other will be your designated agent (decision maker) by drafting documents that address financial or healthcare matters:
- A financial power of attorney can name your partner as the trusted individual to make financial decisions for you should you become unable to manage your own affairs
- A healthcare power of attorney and living will (also called an advance healthcare directive) can name your partner as your medical decision maker should you be unable to make or communicate your medical decisions for yourself.
Estate Planning If You Are Going Through A Divorce
Sadly, many marriages ultimately end in divorce. If in the process of divorcing, it is important to consider your current estate planning implications should something suddenly happen to you. Some decisions that you might want to change immediately include the following:
- The person named as your medical decision maker. Choosing a different decision maker can usually be done at any time. Most people would not want their soon-to-be-ex in charge of making life and death decisions on their behalf.
- The person appointed to make financial decisions on your behalf. Depending upon the type of financial power of attorney that has been prepared, your ex might be authorized to act on your behalf only when you are no longer capable of handling your affairs (a springing power of attorney)—or your ex might be authorized to act on your behalf now (an immediate power of attorney).
- The guardian of your minor children from a prior relationship or marriage if you no longer want your soon-to-be ex-spouse to be the guardian.
- The person named in your will as personal representative or trustee of your trust (if you have a separate trust from your spouse).
However, there are some things that you may not be able to change until after the divorce is finalized. For example, when a divorce case is pending in court, the couple is legally prevented from changing the following:
- Legal title to bank accounts, real estate, and other types of investments
- Beneficiary of a will or trust
- Beneficiary designations on retirement accounts
- Beneficiary designations on life insurance
- Ownership of personal property such as vehicles, art, furnishings, etc.
Once a divorce has become final and the property division is memorialized in the divorce decree you have the right (and should not delay) to revise your estate plan in whatever manner you wish, keeping in mind any requirements imposed by the divorce decree, elective share laws for child support, or continuing spousal support obligations.
As you can see, obtaining solid legal estate planning counsel when you have a significant other—whether it is a spouse or partner—or minor children can be critically important. Without careful planning, you are almost guaranteeing that your loved ones will experience frustration, expense, and delays when it comes to the management and distribution of your property if something happens to you. Conversely, a carefully crafted estate plan can provide significant peace of mind for you, your significant other, and your children for years to come.