Getting married is one of the most exciting times in a person's life. If you have recently married, it is also a good time to update your estate plan. Having an estate plan can serve many purposes, including planning for sickness or death, helping family members avoid probate court, and saving money on taxes.
Know the Difference between Marital Property v. Separate Property
After marriage, couples share joint property and taxes, which makes ownership of assets in their estate more complicated. It is important for couples to understand what property is marital property and what is considered separate property, so they can plan accordingly.
Marital property includes most property that was acquired during the marriage with some exceptions, like gifts, inheritances, and proceeds from a personal injury case. All property before marriage is usually a partner's separate property, including things like funds in a 401k up until the date of marriage.
Be Prepared for the Unexpected with Powers of Attorney
Many people believe that if they become incapacitated, their spouse will be allowed to make medical and financial decisions on their behalf. This is not the case unless you have given your spouse powers of attorney with respect to financial matters and medical decisions. You must have signed the paperwork in advance and they must have appointed your spouse as the person that you want to make financial and medical decisions on your behalf.
Usually this requires two documents, one for financial decisions and one for medical decisions. The financial power of attorney also allows you to decide who you want to take care of assets in your estate in the event of incapacity. The medical power of attorney gives your health care agent to make medical decisions for you when you are not able to do so yourself.
Understand the Importance of a Living Will
Having a living will is another important document for married couples who are planning their estate. Doctors who are caring for a patient without a living will must obtain a court order to withhold any treatment, even if the treatment would not be expected to prolong your life or help you recover. This can be an expensive process, especially if there is disagreement between a spouse and family members about what you would have wanted.
Avoid Probate Court
Another common misconception is that a spouse will inherit all your property automatically. This is not necessarily the case. Some property may automatically go to your spouse, like money in a payable-on-death or joint account, but other assets go to beneficiaries according to state statutes.
Passing away without a will can force your spouse to sue your estate in probate court.
Ensure Your Children Have What They Need
Couples with children may want to consider not only what they want to happen at the end of life individually, but what they want to happen in the event both spouses are not around or are incapacitated. An estate plan can name a person who should take over guardianship of minor children in the event of death or incapacity.
Parents of minor children are usually pretty good about leaving detailed instructions for the sitter when they go away for the weekend, but they fail to leave any instructions for what happens if they go away forever, unexpectedly. A well-designed estate plan covers that gap.
Parents with one or more responsible and trustworthy adult children may also consider naming them as successor agents in their powers of attorney.
Don't Forget about Your Pets
Just as parents can name a person to take care of their children in estate planning documents, they can also name a person to take care of family pets. Couples who want to ensure that their pet is cared for in the future may even set up a pet trust and direct funds in the trust to be spent for the pet's care.
Estate Planning for Married Couples is about Preparedness
Estate planning is a good time for couples to talk about what they want to happen in the event of incapacity or death. It is a good way to plan for the future, which can help give them some peace of mind because they know that their wishes have been put in writing for financial decisions, healthcare decisions, their family, and their estate.
Estate planning can help couples make sure that their plan fits their unique wishes. This can help avoid a situation where decisions are made according to one-size-fits-all state laws.