The June Wedding was Spectacular and the Newlyweds Are Back. So What’s Estate Planning Got to Do with It?
Estate planning for newlyweds should begin immediately following the honeymoon.The summer wedding season has begun! It’s always so exciting to witness two people falling in love and planning romantic destination weddings. Seeing a happy couple pledge their love under the wedding arch brings a joyful tear to one’s eye. So, for those of you to whom the expression applies, mazel tov!
As couples who were recently married continue to bask in the afterglow of their romantic honeymoon, it’s hard for them to imagine how anything could jeopardize their happiness. What could possibly happen?
Life happens. And with that reality check comes the need for all couples – especially newlyweds – to take control of their circumstances in order to ensure a more financially stable future for themselves and their family. Unfortunately, most young couples simply are not aware of the financial and legal consequences of what would happen without the proper planning.
While many smart couples began to do basic financial planning long before the wedding – such as preparing a monthly budget, deciding whether to rent or buy, and agreeing on whose furniture to keep – some couples overlook the importance of the following:
Beneficiary Designations: Be sure to immediately update the beneficiary information on life insurance coverage, including group coverage at work. This will ensure that in the event of death, the surviving spouse receives the proceeds, versus parents or a former significant other who may have been a previous choice as beneficiary.
Titling Jointly Owned Property: It’s important to correctly title jointly owned property. Married couples should consider Tenants by Entireties form of ownership (TBE). TBE property can protect both parties from an individual spouse’s creditors seeking to attach the assets. For example, if one spouse injures a third party in a car accident, the injured party likely will not be able to take the TBE brokerage account in a lawsuit.
Durable Power of Attorney: Married couples often believe that they have the authority to make financial and legal decisions for each other, but this is not true. If for any reason one spouse becomes incapacitated, a durable power of attorney will enable the other spouse to act as legal agent. Executing respective powers of attorney means couples will avoid the expense and delay of court guardianship proceedings should the unexpected occur.
Health Care Surrogate: In the event of a medical emergency where either spouse requires medical care but is unable to communicate, the designated health care surrogate will have the legal authority to make decisions on the other spouse’s behalf. Couples should be sure to nominate each other as health care proxies.
Revocable Living Trust and Will: If couples own property and have investment accounts, they should consider setting up a trust so that, in the event of unexpected death, assets may be transferred to the designated beneficiaries without going through the costly and time-consuming probate process.
Living Will (Advance Health Care Directive): It’s important that each spouse understand the other’s wishes for certain medical situations and end-of-life decisions. A living will makes it clear whether or not the individual wants to be kept on life support.
Guardian for Minor Children: In the case of newlyweds with an existing child by a previous relationship, naming a guardian to care for the child is an important part of one’s estate plan, especially if the child’s other natural parent is no longer in the picture. Consider appointing a trustee to manage the child’s inheritance as the beneficiary of your Revocable Living Trust until the child becomes of legal age.
Once all the legal documents are in place, it doesn’t stop there. Because “life happens,” young couples can count on the fact that family dynamics and circumstances will continue to change over time. Children are born, assets grow, family relationships evolve, and so should one’s estate plan. A good rule of thumb is to review your estate plan with your attorney at least once every five years.
While the suggestions above comprise typical elements of estate planning, the list is not necessarily comprehensive. The best approach is to make an appointment with an estate planning attorney who will help you craft an estate plan based upon your unique needs as a couple.