Think Estate Planning for Young Couples can be ignored? Guess again.
I’m an estate planning attorney in my thirties. Many of my friends and family are getting married and having children. They often ignore the subject of estate planning, thinking that “Estate planning for young couples simply isn’t necessary.” That’s a big mistake.
Estate planning isn’t just about asset protection. It’s also about making sure that you get to decide what happens with your health, your family, and even your pets.
Here’s a twist that will surprise you
You might assume that spouses automatically become joint owners of each others’ property. That is not the case in Missouri or Illinois, the states where I practice.
Failure to plan your estate, even at a young age, is irresponsible. That sounds harsh, but estate planning for young couples is vital. Here are some of the things that can happen if you have no estate plan:
- Spouses may be unintentionally disinherited.
- Children may be left with no one to take care of them.
- Long court battles may ensue before being able to access assets for maintenance and support or before being able to re-title the family home in their names.
- Ugly fights between family members may break out over your health care.
- There may be no one to take care of your pets.
Take these vital estate planning steps to avoid terrible consequences.
Depending on your situation you should do some or all of the following:
Change Beneficiary Designations
Many of us may have our parents or siblings as our beneficiaries on life insurance policies, bank accounts and retirement accounts prior to our marriage. If we pass away without changing these designations, we have disinherited our spouse. If we have children, we may have disinherited them as well.
Contact your financial planner and financial institution. Make sure that your spouse and children are beneficiaries of your assets upon your death. Establish a trust to provide for your spouse and children. It’s sometimes more beneficial to leave property directly to your trust upon death, depending on the type of asset.
Re-title Real Estate and Financial Accounts
If either spouse owns real estate and financial accounts prior to their marriage, they likely have it titled in their name alone. When they marry, they may not think to have it re-titled in their spouses name as joint owners, or to record a transfer on death designation or deed. Taking that step would re-title the property into the spouse’s name in the event of death. If they have children, they may want their children to have the use of that property in the event of death.
Where does that property go if they die? Here’s what happens in Missouri and Illinois.
Property titled in one person’s name alone when they pass away means that the property must first pass through the probate process before being re-titled into someone else’s name. The probate process generally takes between seven to nine months for an easy estate, and can take more than a year for complicated or contested estates. During this time, your spouse and children do not have the full use the assets or ability to mortgage, sell, rent, or do anything else with the real estate. If accounts and real estate is either re-titled into joint names or steps are taken to ensure that it passes to the spouse or children upon your death, this probate process can be avoided. If steps are taken to re-title the assets or real estate into a trust during your lifetime, this probate process can be avoided as well, plus the trust can provide additional benefits.
Create Powers of Attorney and Living Wills
Terri Schiavo of Florida was twenty-six years old when she slipped into a coma, setting the stage for a fifteen year fight between her husband and parents over her ultimate care wishes. Those fifteen years of heartache and publicity for her and her family could have been avoided by planning for a possible incapacity by having powers of attorney and a living will.
Powers of Attorney documents can take care of health care, financial and property matters and allow someone to step into your shoes and manage your affairs should you become incapacitated. A Health Care Power of Attorney allows someone to coordinate your health care when you can’t, ensuring doctors and hospitals can coordinate your treatment without fear of malpractice claims. A Durable Power of Attorney for financial and property matters allow someone to access your bank accounts to make your house payment, car payment, and take care of your spouse and dependents. A Living Will expresses your final wishes pertaining to life sustaining treatment options.
Establish Guardianships for Children
If you pass away with children, who takes care of them? Without planning, the answer to that question is up to the court. Will the court pick the same person you would have? Will the court pick a family member? Will your child end up in the custody of the state?
No parent wants to risk not knowing the answer to these questions. You can take the answers out of the court’s determination by appointing a guardian for the person and conservator for the estate of your children through a validly executed will. It may also be a good idea to consider a trust for your children’s benefit.
Consider Trusts for Assets and Life Insurance Proceeds (Especially with Minor Children)
Many young couples with children have started accumulating assets for retirement, and before those assets are accumulated have taken out large life insurance policies to make sure that their spouse and children are taken care of in the case of an untimely death. But if your spouse isn’t around to receive the assets upon your death, they may need to go through the probate process and be tied up in court for many months. Worse yet, who manages them for your children once the court is finished?
A court will not allow a minor child to manage their own financial affairs, and will appoint a conservator to manage their assets in the event they are entitled to proceeds after a death. This puts the estate under court supervision, and makes assets less available to your children than you intended. The best way to ensure that the assets are managed efficiently and effectively for years to come, and are available for your children’s health, education, maintenance and support needs quickly and without court interference, is to create a trust for assets and the proceeds of life insurance to flow into after your death.
Consider Estate Planning for Your Pets
Many young couples with and without children may have pets that are like children themselves. Who takes care of these pets after they die or become incapacitated? Where will they live? What money will be used to take care of their food, medical and other needs? Pets are treated as personal property, and provisions must be made for their care if they are not to be destroyed upon your passing. Just like trusts for children, trusts for pets can be established for their care.
Bottom line: Estate planning for newlyweds and young couples is not a luxury, it’s a practical necessity. Don’t make the mistake of putting it off. Get started now, so you can rest easy and truly enjoy your life together.
Written by Brian G. Quinn, Attorney with Quinn & Banton, L.L.P.