‘Tis the season! Yes, the season for holiday cheer. But it's also engagement season! As the planning begins for your big day in the new year, remember to include estate planning on your list. From the moment you “kiss the bride (or groom),” break the glass, or bind your hands together, your relationship with your partner is going to take on a new financial and legal meaning.
Before you take the step into this new phase of your relationship, it's time to start talking about the responsibilities that come along with saying, “I do.” Don't worry, this doesn't have to be a painful process, as long as you take care of it well in advance. At The Tyra Law Firm, we recommend taking care of your estate plan as early as possible in your married life, and it's never too early to start having the conversation. If you don't yet own a home or have children, now is the perfect time to create a plan that can be easily updated and adapted as your family grows and changes. If you and your soon-to-be spouse are entering into marriage with children from previous relationships, creating a plan becomes absolutely essential. Blended families are a beautiful thing, but the default laws of the State of Maryland may not reflect how you would like your estate plan structured. You will need to craft a unique plan to protect your unique family.
This is a hectic and exciting time in your life, and estate planning can be a stabilizing and rejuvenating part of your engagement and your first marital year. If you are tying the knot this coming year, take a look at this quick, five-step guide to Estate Planning for Newlyweds.
1. Let's Start from the Top: Draft Your Wills and/or Trusts.
Most couples are married without previous estate plans in place, but even if you do have a Will from prior to your marriage, it will need to be updated given the recent changes in your life. Drafting a Will and determining whether you need a trust are important steps for new couples to take together. Often, it is a rejuvenating process that leads to important discussions about wealth, debt, legacy, and values (don't worry, an experienced professional will help you talk through these important topics). With an estate plan in place, the newlyweds can begin their lives together with a clean slate and a clear plan.
2. Update All Beneficiary Designations.
Don't forget to do this step! This one is incredibly important because a simple mistake can cause dire consequences. Any financial accounts that you and your spouse own separately before you are married have what is called a “beneficiary designation.” You may or may not remember filling out this form when you opened your accounts. Basically, this is a form that the financial institution keeps on file and names a particular individual (or entity) that will automatically take ownership of that account when you pass away. Depending on when you opened the accounts, you may have chosen to list a parent, a previous partner, or anyone else who was important in your life at that time.
It is likely you filled out a form like this for all of your financial accounts, including your 401k, IRA, brokerage accounts, and bank accounts. Here's the kicker: getting married or creating a Will does not change your beneficiary designations. The form you signed is superior in the eyes of the law than your Will, so whoever you wrote down will inherit that financial asset…unless you update it. One of the most important things you can do as newlyweds (or newly-engaged) is to go back through all of your beneficiary designations and ensure that you have listed your spouse as the primary beneficiary. Seem overwhelming? This is something an experienced attorney can help you do!
3. Review Your Insurance Policies
Do either of you have any insurance policies in only one of your names? You may be able to save some money by combining your auto insurance coverage. Now that you are planning to get married and rely on one another financially, you may also want to look into a life insurance policy together. Finally, your new, shiny rings and any other personal property may be best protected by getting a policy that covers personal items.
4. Prepare Powers of Attorney and Healthcare Directives.
No one likes to think about their loved ones becoming ill or getting injured; however, both of these possibilities are very real parts of life. To prepare for all eventualities, it is advisable that each partner creates a Durable Power of Attorney and Advance Healthcare Directive. Each of these documents gives the named designee the power to make decisions on behalf of the creator if he or she is unable to act. The Durable Power of Attorney is for financial decision making and the Advance Healthcare Directive is for medical decisions. Before creating these documents, this is a good time to have a conversation about healthcare goals, preferences, and beliefs, and to develop a financial plan if one of you becomes incapacitated.
5. Re-title Any Real Estate.
If one or both spouses owns real estate prior to the marriage, you should have a conversation about whether you want any property to be jointly owned. If you decide to co-own any property, you can re-title the deed by placing it in joint tenancy with the right of survivorship. This gives both spouses rights to the property, and the surviving spouse will take ownership of the property without it having to pass through probate. This may also be the time to discuss creating a trust to hold ownership of property.
Take the Time to Start Fresh
Contrary to popular belief, estate planning isn't some long, drawn-out process that causes a lot of stress. In fact, working with an experienced, compassionate, and efficient estate planning practice can be quite the opposite. As you are building a new life together with your partner, the experience of creating an estate plan (now, before the stresses and chaos of life get in the way) can be cleansing. You and your sweetheart are able to step into your married life organized, calm, and prepared. Make a day of it! Schedule your appointment with one of our experienced estate planning attorneys around a lunch date with your spouse.
If you have a wedding in your future, or if you were recently married, give The Tyra Law Firm a call. Our office number is (301) 315-0811. We would love to help in this joyful time of your life!