Estate Planning Essentials for Newlyweds
Marriage is more than just a romantic partnership. You’re also becoming a legal partner with the person you love – and likely a financial partner as well. Your health and well-being affect your spouse’s life as well as your own, and when something goes wrong it can have tragic consequences for the whole family.
Marriage is more than just a romantic partnership. You’re also becoming a legal partner with the person you love – and likely a financial partner as well. Your health and well-being affect your spouse’s life as well as your own, and when something goes wrong it can have tragic consequences for the whole family.
Planning ahead to protect your spouse in case of your incapacity, illness, or death isn’t very romantic, but it should be at the top of your to-do list when you get back from your honeymoon. After all, if you don’t have the right legal documents in place, your spouse could be left unprotected if something goes wrong – and you could both be left in a big legal mess.
To make sure that you and your new spouse have prepared for unexpected illnesses or an untimely death, working with an estate planning lawyer is a good idea after tying the knot. An attorney can help you to explore some of the key legal tools that give you the peace of mind of knowing your beloved is cared for if something happens to you.
Planning for Illness and Incapacity
If either you or your spouse get sick or hurt, a few key issues need to be addressed: how healthcare decisions are made and what happens if home care or nursing care is needed.
When you’re incapacitated by illness or injury, you may be unable to make financial decisions on your own. But, you can act in advance of this occurring so you have control over what happens to you. Some of the estate planning documents you should create to prepare for incapacity or illness include:
- A living will: Living wills specify what kinds of extraordinary care you wish to receive, if any. You can make your preferences known regarding feeding tubes, CPR, a ventilator, and more.
- A DNR: If you don’t want extraordinary measures used to prolong your life, consider signing a Do Not Resuscitate order.
- A healthcare proxy: You should use this tool to name someone who will make healthcare decisions on your behalf when you can’t. You could name your spouse or someone else you trust.
Making your preferences for medical care known in advance spares your spouse the difficulty of trying to figure out what care you’d want to receive or wish to decline. You also need to plan for the financial and personal aspects of incapacity. You can do this by:
- Making a nursing home plan: This could involve researching options for care, as well as taking steps to protect wealth so you can qualify for Medicaid to pay for a nursing home or home care without impoverishing yourself.
- Creating a durable power of attorney: Naming someone to act as your agent to make decisions on your behalf and to manage your assets gives you control of who acts for you when you can no longer act on your own.
- Creating a revocable trust: Revocable trusts are also a means of protecting assets and determining who manages them. You can serve as the trustee so you retain control over your wealth, but can name a backup trustee to take over management of trust assets if something happens to you.
Estate Planning for Newlyweds
It’s also important to prepare in case either you or your spouse passes away. Some of the key steps you should take include:
- Making a will: A will gives you the chance to specify who inherits your assets after you pass away. You should be aware you can’t easily disinherit your spouse in most states. If you leave your spouse out of your will, your spouse could claim a spousal elective share. This means they’d get a portion of assets regardless of what your will says. Other estate planning tools could help you avoid this if you want the bulk of your wealth to go to other family members, such as children from another relationship. You should also know when you leave assets to loved ones using a will, the assets typically must pass through probate unless your estate is very small. This can take months.
- Creating a trust: Trusts give you much more control over what happens to your wealth. A revocable trust, which as mentioned above can also help protect assets, also allows wealth to pass outside of the probate process. You may wish to make a revocable trust if you want your spouse to inherit quickly. Irrevocable trusts can also be used to help reduce estate tax. And, there are specific types of trusts you could create, such as a spendthrift trust if you have irresponsible heirs and don’t want them to receive full control over all inherited assets at once, or a special needs trust if you want to provide for a disabled child without jeopardizing access to means-tested government benefits.
- Buying life insurance: If your spouse is dependent upon your income, the purchase of life insurance could be very important. You’ll need to determine how much life insurance is needed to provide for your spouse and other dependents. You’ll also need to consider whether your spouse should be the beneficiary or whether a trust should.
If you leave all your assets to your spouse, you don’t have to worry about estate taxes. But, if you are leaving wealth to other family members, you could be taxed by the federal government or by your state on larger transfers of assets. Different tools such as inter vivos giving, irrevocable trusts, or the creation of a family LLC can help reduce your tax liability.
If you don’t make an estate plan, your state’s intestacy laws determine who inherits. While these laws aim to distribute property among close family, they may still divide your wealth differently than you’d have preferred.
Start Your Estate Plan After Marriage
Although it’s not fun to think about, it’s important to make an estate plan when you have a spouse depending on you – especially if you ever plan for children. Making a comprehensive plan can be complicated, so getting legal advice is often advisable.
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