Young Couples’ Estate Plans
Even if you’re young, newly married or just had your first child, you need basic estate planning. Here’s how to start.
A comprehensive estate plan offers benefits to almost everyone: control over distribution of your property after your death, including trusts for your spouse or children; naming of guardians for minor children; designation of a personal representative to administer your estate; appointment of agents to make financial and health-care decisions for you when needed; and reduction or elimination of estate taxes at death.
If you’re a young married, here are your first tasks:
Determine ownership of assets. As part of a young married couple, you must determine how you both intend to own assets during marriage.
In common law property states, title to an asset generally determines ownership. Do you intend to own assets jointly or separately? Community property states assume marrieds own assets equally regardless of the title, with limited exceptions.
Clarifying this issue while both you and your spouse are alive avoids unintended consequences – and family fights – after one of you dies.
Name guardians for minor children. Having people in place to raise underage children if you both die ranks as probably the most important topic for most young couples. Resolve this issue by naming a guardian in your wills and avoid a potential future custody fight among your families.
Designate proper beneficiaries. Possibly, life insurance and retirement plans are the most valuable assets you own as a young couple. Such assets pass automatically to the beneficiaries named on the accounts; your spouse’s will doesn’t control them.
Review your beneficiary designations to make sure they pass at death as you intend and want.
Create trusts for young children. Rather than leaving assets directly to your children, consider leaving assets in trust for their benefit until they reach an appropriate age. Name the trust as beneficiary, rather than your minor children themselves, for your life insurance and retirement plans.
You also need to name a trustee to manage the trust assets and make distributions to the children until they reach the designated age. Be cautious about naming a family member as trustee if that person lacks experience handling financial matters or who can’t turn down requests for money from the children or guardians.
Include financial and health-care powers of attorney. Estate plans often include financial and health-care powers of attorney in which you and your spouse name each other to make decisions if accident or injury incapacitates one of you.
You hold no automatic, legal authority to make financial and medical decisions for your spouse. You need powers of attorney to avoid court guardianship in the event of incapacity.
Here’s what not to do:
Draft your own will or use store-bought forms. Drafting your own will or buying a pre-printed form is penny-wise and pound-foolish.
Many attorneys offer free consultation and an estimate of fees. By not knowing good questions or technical issues involved, drafting your own will can create more problems than it solves.
Name minor children as beneficiaries. Placing them in line for life insurance and retirement benefits sometimes makes for significant complications. Since minors can’t own property, insurers and retirement plan custodians won’t distribute assets to them without a custodial account – established in court and at extra expense – until the children turn legal age.
Spend time at the beginning of the process with an experienced attorney or financial advisor to make sure you designate beneficiaries properly.
Believe estate planning is a one-time event. Estate planning evolves over time. As your circumstances change – your wealth increases, your children grow up, you age – your views about your estate plan also change.
Revise your plan from time to time on your own. Because laws governing estate tax and other planning details shift over time, review your plan with your financial advisor at least every five years.
Get lured into high-cost planning. Most young couples can make estate plans simply. You likely find yourself set with wills, powers of attorney and proper designations on life insurance and retirement plan benefits. And particularly if you own all assets jointly with your spouse or if the assets are in life insurance and retirement plan benefits that name your spouse as beneficiary.
Delay. Young people often overlook estate planning, even though it’s easy and necessary.
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Dean Stange, J.D., is a financial consultant at Wipfli Hewins Investment Advisors LLC in Madison, Wis.
The information presented herein is standard information and intended only as a broad discussion of generally available incapacity-planning tools that a reader might consider discussing in detail with their attorney or other qualified professional advisor(s). None of the information contained herein is specific to the laws, rules or regulations of any state or other governing body, and as such cannot be construed as, or used as a substitute for, legal advice. Further, none of the information contained herein has been written or personalized for any individual, and the information may not be applicable or beneficial to anyone’s personal situation(s). The documents and processes identified herein can be complicated, and in many cases require the assistance of a qualified attorney to execute effectively. To the extent that you have questions about or wish to make use of any of the tools or processes identified herein, you are encouraged to seek the advice of your attorney. You assume full responsibility for your use of the general information contained herein and acknowledge and agree that by using the information contained herein Hewins Financial Advisors, LLC, its affiliates, agents and/or employees shall have no responsibility or liability for any claim, damage or loss resulting from your use of such information.
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