Your Guide to Successful Estate Planning With a Significant Other

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.  Simple wills, financial powers of attorney, and healthcare directives may be sufficient planning for the first years of marriage for couples with minimal property and savings.  

However, the age at which couples are getting married for the first time continues to rise.  As a result, 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.  

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 if you become unable to manage your affairs or die sooner than you expect.

1. Communication is Key to Successful Estate Planning for Married Couples

An all-too-common mistake made by married couples when approaching estate planning is assuming their spouse will see things in the same way that they do.  The following questions should be asked of each spouse:

  • 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 for and raise your minor children if you die? 
  • How do you feel about the necessity of purchasing and maintaining life insurance? 
  • 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 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.

2. Joint versus Separate Estate Plans for Married Couples

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 property and financial accounts 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?  
  • And if you do 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?

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 could likely generate conflict or even just 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.

3. The Importance of Understanding Elective Share Laws

It is important to understand that even if you and your spouse choose to do your estate planning separately, the United States has elective share laws designed to ensure that a married individual cannot completely disinherit a spouse or minor child from a prior 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 deceased’s property and financial accounts 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 strict requirements (which can vary by state) to be valid.  For example, most state laws require that the disinherited spouse must have been represented by independent legal counsel when negotiating the waiver.

4. Estate Planning for 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, if you die without a valid will or trust, or are unable to manage your affairs, the default laws (intestacy laws) that govern how your property is to be managed, 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 given  the type of asset held.  

  • Joint Title – Assets that are properly titled as joint property (e.g. bank accounts and real estate) ensure that it passes to the survivor automatically at the deceased partner’s death.  
  • Payable-On-Death (POD) Accounts – Naming your partner as the payable-on-death (POD) or transfer-on-death (TOD) beneficiary of certain financial accounts also ensures that the funds pass to the surviving partner at the deceased partner’s death.  
  • Retirement Plan Beneficiary Designation – Properly naming your partner as the beneficiary on your IRA, 401(k), 403(b), or other retirement plan ensures those funds pass to the surviving partner at the deceased partner’s death.  
  • Will or Trust Beneficiary Designation – Naming your partner as a beneficiary in a Will or Trust you have drafted by an experienced attorney safeguards the designated property for your surviving partner.  
  • Insurance Policy Beneficiary Designation – Naming your partner as the beneficiary on a life insurance policy ensures those funds pass to your surviving partner.  

Each of these vehicles for 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, although your intent was merely to allow your partner to inherit that property upon your death, jointly titling your property with a partner can subject that property to your partner’s lawsuits or creditor claims in the future.

5. Incapacity Planning for Unmarried Couples

It is also especially important that unmarried couples consider planning for potential incapacity and whether your significant other will be your designated agent (decision maker) by drafting documents that address financial or healthcare matters:

  • Financial Power of Attorney – 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.  

Advance Health Care Directive – A healthcare power of attorney and living will (also called an Advance Health Care Directive) can name your partner as your medical decision-maker should you be unable to make or communicate your medical decisions for yourself.

6. Necessary Estate Planning Updates During a Divorce

Sadly, many marriages ultimately end in divorce.  If you are 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:

  • Designated Health Care Agent – the person named as your medical decision-maker.  Most people would not want their soon-to-be-ex in charge of making life and death decisions on their behalf.  Choosing and changing to a different decision-maker for your healthcare needs can usually be done relatively quickly and at any time.  
  • Financial Power of Attorney Agent – 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 immediately or when you are no longer capable of handling your affairs (a springing power of attorney).  Check your existing document so that you know which type of power of attorney you have.  
  • Guardianship the guardian of your minor child(ren) from a prior relationship or marriage.    

Will or Trust Beneficiary Designation – the person named as the personal representative under your Will or named as the trustee under your Trust (if you have a separate trust from your spouse).

7. Necessary Estate Planning Updates After a Divorce

There are some items that you may be unable to change until after a 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
  • A beneficiary of a will or trust
  • Beneficiary designations on retirement accounts
  • Beneficiary designations on life insurance
  • Ownership of personal property (e.g. vehicles, art, furnishings, etc.).

Once a divorce is final and the property division is memorialized in the divorce decree, you have the right to (and should not delay) revising your estate plan in whatever manner you wish.  Be sure to keep in mind any requirements imposed by the divorce decree, elective share laws for child support, and continuing spousal support obligations.

Contact Syntero Group to Secure Your Estate Planning Goals

As you can see, obtaining solid legal advice from a competent estate planning attorney is critical when you have minor children or a significant other – whether it is a spouse or not. Without careful planning, you are almost guaranteeing that your loved ones will experience frustration, expense, and delays in 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.  To discuss how we can help you with your estate planning goals, contact us by calling our office or contacting us online today to schedule a virtual or in-person consultation.