Engaged Couples and their Estate Planning Needs
It’s engagement season! During the holiday season, lots of couples take that leap and get engaged to be married – There’s beautiful light displays, Christmas Eve, Christmas Day, New Years, and Valentine’s Day is right around the corner. With the fiancé season upon us, it brings up the important question – do engaged couples, or even long-term partnered couples that have not been married, need estate planning documents? The short answer is YES – the most important considerations are not always who gets what when someone dies – they are often about making sure a fiancé, partner, or new spouse is solidified as their agent to make financial and medical decisions, instead of family members that would have been the default choice before partnering up. There can be horror stories in blended families or families where there are different surnames where the right person is not permitted to act. Planning to avoid these situations is really important.
However, this doesn’t have to be a painful process, as long as you take care of it well in advance. At Wakefield Law, we recommend taking care of your estate plan as early as possible. 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 spouse are entering into marriage with children from previous relationships, creating a plan becomes absolutely essential. Love and partnership are beautiful things, but the default laws of the Commonwealth of Virginia may not reflect how you would like your estate plan structured. You will need to craft a unique plan to protect your unique family.
1. Let’s Start from the Top: Draft Your Wills and/or Trusts.
Most couples get together and do not have previous estate plans in place, but even if you do have an older will, 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 revitalizing 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, you and your partner can thrive in your 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 account has 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 to 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 is to go back through all of your beneficiary designations and ensure that you have listed your partner 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. You may also want to look into a life insurance policy together now. 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 you own real estate, 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 partners rights to the property, and the surviving partner 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. Alternatively, you can create a joint trust even before marriage occurs – that way you can re-deed the home into the trust and make clear all disposition instructions for the 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.
If you have a wedding in your future, have been with a partner for a long time, or if you were recently married, give Wakefield Law a call. Our office number is (703) 771-9740. We would love to help get your plan solidified to protect you and your loved ones!