Getting married is one of life’s watershed events; few other things usher in as many changes, adjustments—and joys—as starting a new home with the person you love most in the world. The days and weeks after the wedding are typically filled with dozens of decisions and changes: moving into a new home, combining your “stuff,” establishing a family routine… and even writing thank-you notes for the wedding gifts!
One thing that many newlyweds don’t think about, however, is estate planning. After all, it sounds like something you do when you have a lot of money or at least when children come along. But the fact is, estate planning is important for everyone, and especially so for two people who are starting to build a life together.
At its simplest, an estate plan is what tells others how you want your most important matters handled in the event that you are no longer able to make decisions about them. That could be because of death, but it could also be because of a sudden illness or accident that renders you incapable of managing your own affairs. Even if you don’t have an extensive estate, as a newlywed couple you may own a home, or you may have valuable possessions in your rented dwelling. And even if neither of those circumstances is the case, you still need to appoint someone to handle routine financial decisions and provide direction to medical professionals if you aren’t able to do those things for yourself. All of these matters are covered by estate planning.
Let’s review the basic documents you should have in place.
A Will
A will provides your guidance for the probate process: how your possessions and other parts of your estate are handled in the event of your passing. What many don’t realize is that if they do not have a will they have designed, their state has a will that it will impose. Most of us would prefer to direct how our final affairs are handled, rather than leaving it up to the courts. That is the most fundamental reason why you and your spouse should both have a properly designed will. Another benefit of having a will is that it relieves the surviving spouse of having to make decisions they may not be prepared to make. Instead, the will provides a map that can be followed, providing the comfort of knowing how you wanted things to be handled. Once children are involved—or if the marriage involves someone who has children from a previous union—the will also allows you to stipulate who would have guardianship of the children, rather than leaving this decision to the state. When a will is present, it can also streamline the probate process, which makes things easier for a surviving spouse or other family member.
Power of Attorney
A power of attorney (POA) appoints a person or entity you choose to handle your financial affairs if you are unable to do so. Even if you intend for your spouse to carry out these duties, a power of attorney will typically make it easier for the spouse to make necessary financial arrangements. It is important to realize that in many states, marriage alone does not automatically confer all the necessary authority a spouse may need to perform certain financial functions. Having a POA in place removes obstacles for a spouse who may need to pay bills, enter into buying or selling agreements, or manage investments.
Healthcare Directive
A healthcare directive (sometimes called a “living will”) is similar to a POA, but applies only to healthcare and medical decisions. Keep in mind that even if you are in excellent health, an accident could happen that could render you incapable of making your own decisions. Once again, many states do not automatically recognize a spouse’s right to make such decisions in the absence of a healthcare directive. Alternatively, you may wish to name someone other than your spouse in your healthcare directive—perhaps a close friend or family member with medical training. Whomever you choose, having a healthcare directive in place ensures that someone will be able to see that your wishes for the type and extent of procedures carried out on your behalf are done in accordance with your intentions.
Other Considerations
As newlyweds, you should also give some thought to how your various accounts and possessions are titled. For example, if you have a checking account that is used to pay your household expenses, you may want to set it up as a joint tenancy with rights of survivorship (JTWROS). That would mean that both account owners are equally empowered to access and use the account, and in the event of the death of one owner, full ownership would vest in the survivor. Similarly, if you a buying a home, you may wish to have the property titled as JTWROS, which would allow the surviving spouse to make any decisions necessary concerning the property. If you have investment accounts, you may want to consider JTWROS for them, as well.
Marital vs. Separate Property
In most states, any property acquired during the marriage is considered to be shared equally by the spouses (“marital property”). Property that was owned by one spouse prior to the marriage may be designated as separate property, and if the spouse intends to maintain it as such, it is important that the property be segregated from the marital assets. Property that is inherited by one spouse can also be designated as separate property, but again, it is important that it not be commingled with marital property, or it may lose its character as separate property.
At Mathis Wealth Management, we provide fiduciary guidance for clients who are making important financial decisions. If you are starting out as a new family and have questions about organizing your finances or any other important financial matter, we want to help you find the answers you need. To learn more, visit our website to read our article, “Who Do You Trust? Questions to Ask when Choosing a Financial Advisor.”
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