Wedding season is winding down, and if you are a newlywed or are planning to tie the knot soon, it’s time to make your first legal move as a married couple – creating an estate plan. With all the joy and happiness a new marriage brings, planning for your potential incapacity and future death may feel out of place, but creating your estate plan as part of your post-nuptial to-do list is the greatest gift you can give your new spouse.
A lot changes once your marriage is official, but how you and your spouse want your finances to be managed or how you would want medical decisions to be made for each other are not automatically documented when you say “I do.”
Here are 6 essential estate planning tools you need to put in place right now.
01 | Updated Beneficiary Designations
One of the easiest estate planning tasks that newlyweds often overlook is updating their beneficiary designations. Some of your most valuable assets, such as life insurance policies, 401(k)s, and IRAs, do not transfer via a Will or Trust. Instead, they have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death.
While you might consider creating and using a Trust to transfer retirement (only with the guidance of a lawyer, as this can be complex and have tax consequences) or life insurance distributions, you shouldn’t wait until your Trust is created or your estate plan is complete to update your beneficiary designations. Until your estate plan is finished, if you would want your spouse to receive your retirement account benefits or life insurance at your death, you need to proactively name your spouse as your primary beneficiary, and then name at least one contingent, or alternate, beneficiary in case your spouse dies with or before you.
If you have minor children at home, remember to never name a minor child as a beneficiary of your life insurance or retirement accounts, even as a contingent beneficiary. If a minor is listed as the beneficiary, the assets would be distributed to a court-appointed custodian, who will be in charge of managing the funds until the child reaches the age of eighteen, at which point the funds would be distributed to them outright, to do with what they want. Instead, you can set up a Trust and name the Trust to receive your life insurance or retirement account benefits.
If you have children or you plan to have children in the future, you should set up a Trust to receive those assets instead, so they can be properly managed for your child’s well-being while keeping the funds safe from any future overspending, debt, or legal trouble your child may have. Creating a Trust to hold and distribute assets to your children is even more important if your marriage creates a blended family, as it will ensure your children inherit from you in the way you want and avoid conflict between step-siblings.
If you aren’t sure how to update your beneficiary designations in the best way, contact us. When we meet, we’ll look at exactly what you own and will guide you on exactly how your beneficiary designations should be filled out now and after your other estate planning tools like a Will or Trust are created.
02 | A Durable Financial Power of Attorney
Estate planning is not just about planning for what happens when you die. It’s equally about planning for your life and the unexpected events life throws your way, like a serious illness or accident that may leave you incapacitated.
If you become incapacitated and have not added your spouse as an owner on your bank accounts or legally granted them permission to manage your financial and legal interests, they may have to petition the court to be appointed as your guardian or conservator to handle these affairs for you. This is surprising to many newlyweds and long-time married couples who assume their spouse has automatic access to all of their assets at any time. Sadly, this isn’t always the case, and without giving written permission to your spouse through a Durable Financial Power of Attorney, that authority could be given to someone else by the court.
A Durable Financial Power of Attorney would grant your spouse the immediate authority to manage your financial, legal, and business affairs in the event of your incapacity, and give them a broad range of powers to handle things like paying your bills and taxes, collecting government benefits for your care, selling your home or car, and managing your banking and investing.
Creating a Durable Financial Power of Attorney is especially important for those who don’t live in a community property state like ours in Texas. (Other community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington, and Wisconsin.) In non-community property states, the law does not assume one’s spouse has any ownership of property in their name alone, which means a spouse could be forced to move out of the couple’s shared home or give up shared property with little notice and little legal recourse. Although that’s not the case in Texas, problems with your property could still arise if you were to become incapacitated without your spouse having Durable Power of Attorney to manage your affairs.
03 | A Power of Attorney for Health Care and Living Will
Where a Durable Financial Power of Attorney gives your spouse the authority to manage your financial and legal matters, a Power of Attorney for Health Care (also called a “Medical Power of Attorney”) lets them make medical decisions for you if you can’t communicate them for yourself.
For example, a Power of Attorney for Health Care would let your spouse make decisions about your medical treatment if you are in a serious car accident or hospitalized with a debilitating illness. If you don’t name your spouse as your Power of Attorney for Health Care and you do become incapacitated, your spouse would have to petition the court to become your legal guardian before they can make any major medical decisions on your behalf.
Even though your spouse is generally the court’s first choice for your legal guardian, relatives may also petition the court to be appointed as your guardian, which can create severe conflict and financial strain in your family. Creating a Power of Attorney for Health Care that names your spouse as your decision-maker far in advance will spare your spouse the time, money, and stress involved with a court guardianship process.
Within or separate from your Power of Attorney for Health Care should be your Living Will. A Living Will explains to medical providers and to your decision-maker how you would want your medical care handled, particularly at the end of life. Because a Power of Attorney for Health Care and a Living Will go hand-in-hand, they are often combined into a single document.
In your Living Will, you can explain your wishes for life support, whether you would want hydration and nutrition supplied intravenously, and even what kind of food you want and who can visit you in the hospital. It is always a relief to your spouse to have instructions and wishes written out by you in advance that they can lean on, rather than having the added stress and trauma of trying to guess what your wishes would be in these situations.
Through Sickness and Health, We Can Help
Between moving in together, establishing a new routine, and combining your finances, estate planning can seem like a low priority for newlyweds. But in reality, estate planning shortly after getting married is one of the smartest decisions you can make for your marriage. Creating your plan shortly after your wedding is also the most convenient time to plan, since you will inevitably be going to the bank and contacting your financial institutions to update your new marital status.
To make sure your new spouse has immediate access to your assets and that you can always care for them in the way they would want, give us a call. We would be honored to help you and your spouse plan for your new life and your future through our unique, heart-centered process.
If talking about finances and death shortly after your wedding feels heavy, don’t worry. We’ll guide the discussion in a way that feels casual, natural, and helps facilitate open communication between you and your new spouse.
Don’t forget to check back next week for part two of this series!
This article is a service of Davidek Law Firm, PLLC. We don’t just draft documents; we ensure that families and business owners make informed and empowered decisions about life and death, for themselves and the people they love.
Like a lot of folks, maybe you thought that creating a Will or Trust is something you can do once and then your family and assets are protected forever after. But, it’s not that simple, and thinking of it that way could leave your family with a big mess when something happens to you.
In reality, life events can drastically affect your estate plan and even cause your plan not to work in the way you intended. To make sure your plan remains up to date throughout your life, we recommend reviewing your plan at a minimum of every three years. Because we are so passionate about this, we offer to review our clients’ plans every three years for free; and we offer a Client Care Program that allows and encourages our clients to review their plans annually.
And, if any of these 10 life events happen before your three-year plan review, you’ll want to have your plan professionally reviewed right away. Let’s take a look at these 10 life events and how they can affect your estate plan and what changes may be required.
01 | Your Assets or Liabilities Changed
Changes in your assets, such as acquiring a new home or other assets, selling property, or incurring debt should prompt a review of your estate plan. You may need to update asset distribution, beneficiary designations, and financial provisions to reflect these changes accurately and ensure that the people you love receive what you intend when you die.
02 | You Bought, Sold, or Started a Business
Owning a business adds another layer of complexity to your estate plan. If you’ve recently bought or sold a business, it’s essential to update your plan to reflect what you want to happen to your business when you die, ensure a smooth transfer of ownership (if desired), and create a plan to protect your business assets for yourself and your loved one’s future.
03 | You Gave Birth or Adopted a Child
Welcoming a new child into your family is an incredibly joyful moment. As a parent, it’s essential to update your estate plan to include provisions for your child’s well-being and financial future. This includes naming Guardians for minor children, creating a Kids Protection Plan®, and ensuring their financial security through Trusts or other means.
04 | Your Minor Child Reached the Age of Majority (or Will Soon)
As your children grow up and reach the age of majority, it’s time to review how they will receive their inheritance, make sure someone can legally make healthcare decisions for them, and manage their money in the event they become incapacitated. Depending on their level of maturity, you may want to consider if they are ready to handle assets on their own and if so, what amount.
05 | A Loved One Dies
The loss of a family member is emotionally devastating, and it can significantly affect your estate plan. If a deceased loved one was a recipient of assets under your Will, Trust, or financial accounts, it’s crucial to update these documents to make sure your assets will be distributed to the right people.
06 | You Became Seriously Ill or Injured
A sudden illness or injury can leave you incapacitated and unable to manage your affairs. Therefore, it’s essential to review your estate plan to ensure it includes Powers of Attorney for healthcare and finances. These documents let you name someone you trust to pay your bills and manage your assets, as well as make medical decisions for you if you can’t speak for yourself.
07 | You Moved Here From Another State
Each state has its own laws and regulations regarding estate planning, so if you moved here from another state after completing your estate plan, it’s crucial to have your plan reviewed by a local attorney. If your existing plan doesn’t meet our state’s requirements for how an estate plan is signed or witnessed, or contains terms or processes that differ from the processes of our state, this can cause delays when your plan needs to be used and may even require a court to review its validity.
08 | You Got Married
Marriage brings about not only joy and celebration but also important legal updates that are easy to put off. When you tie the knot, your estate plan needs to reflect your new marital status. Some states automatically make your spouse a co-owner of some of your property, but that doesn’t ensure an easy transfer of that property to your spouse when you die. Other states do not make any automatic updates in ownership.
09 | You Got a Divorce
The end of a marriage is a significant life event that requires immediate attention to your estate plan. After a divorce, you’ll likely need to revoke and redo your entire estate plan. This includes creating a new Will and Trust (if applicable), updating beneficiary designations on life insurance and retirement accounts, and revising asset distribution to reflect your new circumstances and relationships.
10 | The Law Changed
Tax laws are subject to change, and revisions to estate tax exemptions can have a substantial impact on your estate plan. If there are significant changes in federal or state estate tax laws, it’s crucial to review your plan with an estate planning attorney to minimize tax burdens and protect your wealth for your loved ones.
By Your Side Through All of Life’s Changes
Your estate plan serves as the bedrock protecting your family and finances, not just for today but also for the future. However, estate planning isn’t a one-time task – it should adapt and evolve alongside the changes in your life.
At Davidek Law Firm, our mission is to be by your side through all of life’s changes, ensuring your estate plan remains up-to-date and effective no matter what life brings your way. That’s why we offer our clients a complimentary review of their estate plan every three years, and we encourage them to reach out at any time before then with questions about life changes or events that might affect their plan. We also encourage our clients to join our Client Care Program, which includes an annual review of their estate plans (not just every three years), among many other benefits to help keep your plan current and your loved ones protected.
This article is a service of Davidek Law Firm, PLLC. We don’t just draft documents; we ensure that families and business owners make informed and empowered decisions about life and death, for themselves and the people they love.
