07 Jan Estate Planning for Recently Engaged and Newlywed Couples
As soon as “I do’s” have been exchanged, a couple’s legal and financial connection takes on fresh meaning. Engaged couples should begin discussing and implementing some key estate planning initiatives (both before and after the wedding) to ensure protection for themselves and their finances as they move into this new phase of life together. Here are the top five components to help get a jump start on planning:
- Draw up a prenuptial agreement.
Prenups give guidance as to what happens to property, debt, future inheritances and earnings in the event of death and divorce. Everyone has something worth protecting. Entering into a prenuptial agreement helps foster healthy communication about finances from the very beginning of a marriage and gives the parties a clear roadmap of how the finances will be handled if the relationship does not last.
- Create/update wills and trusts.
Couples who each individually already have wills and/or trusts should update them once they are married to correspond with their prenuptial agreement. Even young newlyweds without many assets should execute basic wills, particularly if they wish to leave all assets to their new spouse. Trusts should also be established in certain circumstances, especially where the parties are coming into the marriage with significant nonmarital assets or are entering into a second marriage and wish to benefit children from a prior relationship.
- Designate spouse as beneficiary.
If the parties intend to leave assets to the other spouse and those assets have beneficiary designations, then those should be updated after the wedding to reflect the spouse as the new beneficiary. There are a multitude of accounts that should be reviewed, including life insurance policies, retirement accounts, investments, and pensions. This is especially important because beneficiary designations will take precedence over dispositive provisions of a Will or Trust. [/vc_column_text][/vc_column][/vc_row]
- Retitle real estate.
If either spouse owned a house or other real estate before the marriage, they should consider whether they want to jointly own said property. By retitling the real estate in both the original owner and new spouse’s names, both spouses will have rights to the property and the surviving spouse will automatically inherit the property if the other should die. It also affords the couple asset protection against the creditors of one spouse, which may be an attractive reason to retitle the property. The parties’ prenuptial agreement should address how they wish to deal with real estate acquired prior to and during the marriage.
- Prepare powers of attorney and advance healthcare directives.
Executing a power of attorney and advance healthcare directive ensures one spouse can make financial and medical decisions for the other in the case of an accident or other unexpected incapacity. When assets are titled in one spouse’s individual name, the only way the other spouse can get legal access is through a valid financial power of attorney, so not having one could result in a costly guardianship proceeding. With the healthcare power of attorney and living will, a spouse can designate the other spouse as decision maker and further grant medical record access, detail restrictions on healthcare decisions and identify when to withhold life-sustaining treatment.