The Wealth Advisor
Protecting Your Significant Other’s Future
October is a popular month for couples to tie the knot in the United States. While wedding planning most often includes tuxedos, dresses, rehearsal dinners, and guest lists, an often overlooked part of pending nuptials is estate planning.
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.
The age at which couples are getting married for the first time continues to creep upward, however. It is therefore 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.
If you are considering marriage or have already tied the knot, reviewing the following information can help you tackle the critical task of planning for the management and distribution of your property should you become unable to manage your affairs or die sooner than you expect.
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:
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:
There may be other reasons to seek separate counsel in estate planning. A good rule of thumb is that if there are aspects of your financial and family relationship that will likely breed contention and misunderstanding between you and your spouse, you should consider using separate counsel to help negotiate and resolve the legal and estate planning issues that intersect with these problem areas.
On the other hand, for those who are willing to communicate and resolve the differences discussed above, it may be possible to jointly engage legal counsel to assist with your estate plan. One of the advantages of jointly hiring legal counsel is that the attorney can act in some ways as a mediator and educator, helping you identify and craft creative solutions to challenges that may arise during the estate planning process. Additionally, jointly hiring legal counsel tends to be a less expensive solution and communication tends to flow much more freely when fewer individuals are involved.
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.
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:
Each of these methods of leaving property to your partner has pros and cons. For instance, jointly titling your home with your partner may be an easy way to ensure that your partner will inherit the home that you share when you die. However, if you and your partner split, your former partner now jointly owns that property and can force the sale of the property to liquidate their share. Additionally, there may be gift tax consequences to adding a partner to the title of your banking or investment accounts that could later affect you. Even worse, jointly titling your property with a partner can subject it to your partner’s lawsuits or creditor claims in the future even though your intent was merely to allow your partner to inherit that property upon your death.
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:
Estate Planning When Your Marriage Is on the Rocks
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:
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:
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. Call our office today for a virtual or in-person consultation to discuss how we can help you with your estate planning goals.
Law Offices of J.R. Hastings • 1003 Third Street, San Rafael, California 94901 • 415-450-6692