Estate planning is the best way to ensure your assets and personal wishes are taken care of after your death. It can be difficult to talk about with your spouse; however, it is important to take the necessary steps to protect your loved ones. In fact, a survey done at Trust & Will showed a large percentage of individuals without a Will stated the reason they had not completed the process was because they needed to talk to their spouse before making certain decisions.
Luckily, we are here to help you and your spouse navigate Estate Planning for married couples. Here are a few things to know before getting started.
Estate Planning Strategies for Married Couples: 6 Factors to Consider
Whether you are newly engaged or have been married for multiple years, Estate Planning with your spouse can still involve complicated discussions. It is a good idea to outline key points before getting started, so you are both prepared for the process. Read through the following factors to consider as you start Estate Planning:
Do you live in a community property state?
Should you consider a bypass trust?
What assets do you want to distribute?
How will you distribute said assets?
How will family dynamics influence the process?
Is your preferred strategy tax friendly?
Do You Live in a Community Property State?
A community property state means that each spouse owns exactly half of all assets and income acquired during a marriage. Each spouse can designate what will be done with “their” half of the estate after their death. At this time, the community property states are:
If you live in a community property state, this rule should guide your Estate Planning strategy. You and your spouse should both consider how the state will designate ownership of your assets, and plan accordingly.
Should You Consider a Bypass Trust?
A bypass Trust is one way for married couples to prevent double taxation on assets. This designation is created as part of an AB Trust, which splits into two parts (a marital Trust, and a bypass Trust) after the death of the first spouse. Changes in Estate Planning laws have made these Trusts less useful in terms of tax strategy, but they can still be helpful for couples who want a portion of their assets to flow directly to their beneficiaries (instead of the surviving spouse).
What Assets do You Want to Distribute?
Assets include anything you and your spouse own: real estate, savings accounts, investments, business ownership, or stock portfolios. When Estate Planning as a married couple, you must acknowledge each asset you plan to distribute after your death.
Asset Distribution: When, How, and to Whom
Asset distribution will likely make up the bulk of your Estate Planning process, as it can be time consuming to designate where each of your assets will go. Trust & Will can offer guidance on how to have your assets distributed, as there are various types of Trusts to choose from. However, you and your spouse will need to decide your beneficiaries together -- and when you would prefer for them to receive the assets in question. There are options for beneficiaries to receive an inheritance immediately following a death, or for assets to be placed in a Trust and distributed at a later point in time.
Family dynamics can be uncomfortable to address, but it is yet another important factor to consider when Estate Planning. For example, one spouse may have children from a previous relationship or an important extended family member they need to consider. This information should be disclosed during the Estate Planning process to ensure all loved ones are taken care of.
You don’t need to be an expert in Estate Planning to know that the best strategy for your family will maximize the assets that go to your beneficiaries. Unfortunately, there are a number of Estate taxes that must be applied when someone dies. To successfully account for this, you and your spouse should learn more about the various types of Trusts and how they can help ensure your assets are designated for your loved ones.
Estate Planning for Married Couples - Commonly Asked Questions
The Estate Planning process isn't common sense. But when you're properly prepared, the process becomes easier to navigate. As you walk through the above considerations, you may still have questions on common Estate Planning for married couples. The following answers should to help provide some answers:
Do Married Couples Need One or Two Wills?
Married couples will need to create two Wills depending on whether or not their state recognizes Joint Wills. A Joint Will allows two people, in this case married couples, to create and sign Will, though they aren’t very common. The reason for this is because Joint Wills can only be modified while both spouses are alive, which can create challenges when one spouse outlives the other.
Can My Spouse Change my Will after I Die
Your spouse cannot change your Will after you die, even if you have chosen to create a Joint Will. Most regulations around Estate Planning for couples try to protect both spouses, and prevent any changes from being made in secret or without the knowledge of both parties.
Should a Husband and Wife Have Separate Trusts?
Spouses can have separate Trusts dividing their assets, but there is not a right or wrong way to do so. In some cases, married couples will opt for separate Trusts to protect assets from financial risks brought on by the other spouse. Other couples may choose to keep a joint Trust so their assets can be managed together.
Estate Planning for married couples can seem confusing or difficult to talk about — but that does not make it any less necessary. Set aside time to discuss Estate Planning with your spouse and approach the conversation with the above points in mind. Personal preference, family dynamics, and state laws should all be considered when deciding on an Estate Plan.
Estate Planning is one of the most important things you can do to protect yourself, your family, and your future. Not sure where to start? Trust and Will can help! Take our simple quiz to discover the right Estate Plan for you.