From 'I Do' to 'What If': Estate Planning Must-Do's for Newlyweds - Part 1
Your Essential Guide to Estate Planning for Newlyweds
As wedding season winds down, if you are a newlywed or planning to tie the knot soon, it's time to consider an important step in your new journey together: creating an estate plan. While it may seem out of place amidst the joy of a new marriage, planning for potential incapacity and future uncertainties is a vital gift you can give your new spouse.
Marriage brings many changes, but your financial management preferences and medical decision-making authority aren't automatically documented with your marriage license. If you become incapacitated before creating an estate plan, your spouse won't have the legal authority to make medical decisions or access your bank accounts. In the event of your death, they could even lose shared possessions and the home.
To ensure your wishes are honored and your spouse is protected, here are six essential estate planning tools you need to establish right now.
1. Updated Beneficiary Designations
One of the simplest yet often overlooked estate planning tasks for newlyweds is updating beneficiary designations. Key assets like life insurance policies, 401(k)s, and IRAs don't transfer via a will or trust but through beneficiary designations. To ensure your spouse receives these benefits, name them as your primary beneficiary and designate a contingent beneficiary in case your spouse predeceases you.
If you have minor children, avoid naming them as beneficiaries for life insurance or retirement accounts. Doing so would lead to a court-appointed custodian managing the funds until the child turns eighteen, at which point they would receive the funds outright. Instead, set up a trust to manage these assets for your children's well-being and protection from potential financial or legal issues.
For those with blended families, a trust is crucial to ensure your children inherit as you wish and to prevent conflicts among step-siblings.
2. A Durable Financial Power of Attorney
Estate planning isn't just about what happens after you die; it's also about preparing for life's unexpected events, such as illness or accidents that could leave you incapacitated. Without adding your spouse as an owner on your bank accounts or granting them legal authority through a Durable Financial Power of Attorney, they might have to petition the court to manage your financial affairs.
A Durable Financial Power of Attorney gives your spouse the authority to handle your financial, legal, and business matters if you're incapacitated. This includes paying bills, managing taxes, collecting benefits, and handling property transactions.
This document is particularly important if you don't live in a community property state, where your spouse doesn't automatically have ownership rights to your individual property.
3. A Power of Attorney for Health Care and Living Will
While a Durable Financial Power of Attorney covers financial matters, a Power of Attorney for Health Care lets your spouse make medical decisions on your behalf if you're unable to do so. This includes decisions about your treatment in case of serious injury or illness.
Without this document, your spouse would need to go to court to be appointed as your legal guardian to make medical decisions. This process can be stressful, time-consuming, and expensive. A Power of Attorney for Health Care, coupled with a Living Will, outlines your wishes for life support, hydration, nutrition, and other medical preferences, easing the burden on your spouse during difficult times.
4. Trusts
Setting up a trust can be beneficial for managing your assets during your lifetime and for your heirs after your death. Trusts can help avoid probate, provide privacy, and allow for specific instructions on how and when your assets are distributed.
Trusts are particularly useful if you have children, own significant assets, or want to ensure your spouse is taken care of according to your wishes. They can also help manage estate taxes and provide for your family in a structured manner.
5. A Comprehensive Will
A will is a foundational document that outlines how you want your assets distributed upon your death. It allows you to designate guardians for your minor children, specify funeral arrangements, and leave personal belongings to specific individuals.
While a will can be used in conjunction with a trust, it’s essential to have one to ensure your wishes are legally recognized and to minimize potential conflicts among your heirs.
6. Regular Estate Plan Updates
Your estate plan should be reviewed and updated regularly, especially after significant life events such as marriage, the birth of a child, or the purchase of a home. Regular updates ensure that your plan reflects your current wishes and that your loved ones are protected.
Start Your Journey with Confidence
Between moving in together, establishing a new routine, and combining finances, estate planning might seem like a low priority. However, it's one of the smartest decisions you can make for your marriage. Addressing these matters now will save your spouse from potential legal and financial complications in the future.
Estate planning shortly after your wedding is also convenient, as you’ll already be updating financial institutions about your new marital status. Taking these steps ensures your spouse has immediate access to your assets and can care for you according to your wishes.
If discussing finances and future uncertainties feels daunting, approach it as a way to strengthen your bond and ensure your mutual security. Start your marriage on a solid foundation by creating a comprehensive estate plan that protects both of you.
Check back next week for part two of this series, where we’ll dive deeper into more advanced estate planning strategies for newlyweds.
This article is a service of Zarda Law, S.C. We do not just draft documents; we ensure you make informed decisions about life and death, for yourself and the people you love. That's why we offer a Legacy Planning Session, during which you will get financially organized and make all the best choices for the people you love. You can begin by scheduling a Legacy Planning Session and mention this article to find out how to get this $750 session at no charge.
