While the wedding bells might still be ringing in your ears, it’s never too early for you and your spouse to begin planning your lives together. Wills, trusts and powers of attorney might seem like things you need not worry about for years to come, but as they say, nobody plans to fail, they just fail to plan. Start your married life off on the right foot with some estate planning right now.
What the Heck is Estate Planning Anyway?
In a nutshell, estate planning is laying the groundwork for what happens to your estate when you die. And yes, you do have an estate. Basically, it’s everything you own when you die. This includes real estate; securities like stocks and bonds; your 401(k); and cash in your bank accounts. If you haven’t defined who gets what when you are gone, then your estate goes into a legal process called probate in which the court decides how your property will be distributed. It can be a long process, and your heirs might not receive what you would want them to have. Estate planning is a far better approach.
Start with Your Beneficiaries
While the concept of estate planning may sound daunting, you can begin with an easy first step: changing your beneficiaries. These are those loved ones who should receive — i.e., “benefit” from, hence the term — the proceeds from things like life insurance and your 401(k) after you pass away. Review bank accounts, wills and trusts, and health savings accounts. Your spouse might be the obvious choice of beneficiary, but The Motley Fool also suggests considering a secondary beneficiary if you and your spouse both pass away.
Assigning Who Looks After You
Next is assigning responsibility for making decisions on your behalf should you become incapacitated. These assignments are called powers of attorney. According to Millennial Magazine, a durable power of attorney — one that begins the moment you sign it — protects your finances in the event you cannot make decisions yourself. This means your proxy — the person to whom you assign power of attorney — can pay your bills, manage assets, etc. As such, you should make sure this is a person you can trust. It doesn’t have to be your spouse; in fact, if you are injured or ill, your spouse might be too distraught to be effective in this role.
Speaking of illness and injury, you should also designate a medical power of attorney. This is someone who can make health-related decisions on your behalf. Healthcare power of attorney is a good idea, otherwise the government or local authorities might designate one — and it might not be the person you wish.
Writing Your Will
As with the general concept of estate planning, you might think you don’t have anything that your heirs will want once you are gone. Nonetheless, that will change over time, and writing a will is an important step toward ensuring your assets are distributed according to your wishes.
It’s best to hire an attorney to draft your will rather than doing it yourself. If you don’t, you run the risk of putting your heirs through unnecessary time and effort sorting out your wishes. This includes dooming them to the costly legal fees they might incur fighting one another in court. The article also advises you to choose an executor — someone who will see to it that your will is carried out properly.
Married Before?
You might be a newlywed who also has a marriage behind them. That doesn’t mean these guidelines don’t apply to you. If anything, they are that much more important, as you and your spouse may be bringing assets and children to the marriage.
For instance, what happens to your children’s inheritance if you die before your spouse (their stepparent)? A 2017 article in Forbes suggests you avoid accidentally disinheriting your children by putting your assets into a trust for them. There’s also the issue of your home. According to a the AARP, if you own the home and pass away, you might want to leave it to your children while allowing your surviving spouse to live in it for life. This will require planning on your part.
Regardless of your personal situation, make sure that you revisit your estate plans as you grow old together. Circumstances such as a growing family and changing tax laws might change the way you approach your estate, and reviewing it periodically is smart.
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