Close your eyes and try to imagine someone discussing wills, trusts and estates. What do you see? An old man or woman … or maybe a lawyer? Guess what: If you’re not dealing with this stuff now, you COULD jeopardize your health, your wealth and your partner’s future.
We don’t want to be alarmists, so we’ve put together this little primer to explain what estate planning is, which details you need to take care of immediately, what can wait, and how to go about dealing with it quickly and easily so you can get back to planning the bachelor party, wedding, or honeymoon.
3 Surprising Things That Don’t Change When You Get Married
Eileen O’Connor, CEO of Hemington Wealth Management in Tysons, VA, says, “A lot of our newly married clients assume that once you’re married your spouse automatically has the right to make medical decisions or manage your affairs if you can’t, and that isn’t the case.”
Similarly, your spouse doesn’t automagically (DID YOU MEAN THIS OR SHOULD IT BE AUTOMATICALLY?) become the beneficiary of the bank, investment or retirement accounts you’ve already set up, or life insurance you might have.
4 Things To Do ASAP
These are the very first things you and your spouse (or future spouse) want to do when you’re back from your honeymoon:
- Decide which bank and investment accounts will be jointly owned and change the names on those to reflect this.
- Then reach out to your banks, brokerage firms, and the HR department at your jobs and ask for change of beneficiary forms for all the financial and retirement accounts that remain in one name only and on any life insurance you have.
- You both should also name health-care proxies. This means filling out a short legal form that names a person you want to make medical decisions for you if you can’t (presumably this is your new spouse).
- You also want to set up a power of attorney. This is a legal document that names someone (probably, but not necessarily your spouse) to make legal decisions and handle financial matters on your behalf if you can’t manage them for yourself.
What Happens If You Don’t Assign a Beneficiary, Health-Care Proxy and Power of Attorney?
If you don’t name your spouse as beneficiary on your financial accounts, the money will go to whomever you originally named. If you haven’t named a beneficiary, the money will be distributed according to the laws in your state. Often this is your spouse. But some states will divide your assets between your spouse and kids or even your spouse and your parents, according to Kristin Shirahama, a trusts and estates attorney at Bowditch & Dewey in Boston.
Should the need arise for a health-care proxy or power of attorney and you haven’t named anyone, your spouse would have to go to court and argue for the right to make the decisions for you (and could be challenged by other members of your family). This is a complication you never want to face.
Create a Will ASAP
A will is a document, signed in front of a witness, that leaves instructions for what you want to happen to all property and assets NOT jointly owned or assigned a beneficiary.
What’s key here is that you name guardians for your children and an executor of your estate (the person who will make sure your wishes are carried out regarding all your property and children). It often is, but doesn’t have to be, your spouse.
Both experts urge clients to write wills shortly after getting married. But O’Connor acknowledges that if kids come along, the wills have to be rewritten, so most couples wait until they become parents to do it.
“I recommend newly married couples go through all their assets,” says Shirahama. “If everything is either jointly owned or has a named beneficiary, then you might not need a will right away.”
What Happens If You Don’t Create a Will?
If you die without a will, it’s called dying intestate. In this case any property you have that’s not jointly owned, in a trust, or with a named beneficiary goes through probate court. There, a judge will decide who gets what according to state laws. Probate is a long, time-consuming and expensive process. It could delay or prevent your family getting money they need for day-to-day expenses or to settle your remaining debts. Also, if both spouses pass away the court would decide who would raise your children. And who wants to take that chance?
A will goes through probate court, too, but unless the terms are really unusual (completely disinheriting your children, say, or leaving your house to your dog) it’s fairly routine.
Setting Up Trusts Can Probably Wait
A trust performs the same job as a will, “but it gives you more control,” says O’Connor. It’s what you use when you don’t entirely trust the person you are leaving things to.”
Most often trusts are set up for children, so that they have guidance from a friend or family member (a trustee, who manages the trust, setting up disbursements, making investment decisions and paying taxes due. There is usually a successor or a back-up trustee in case the first one can’t continue in that role.) until they reach whatever age you decide, typically 25.
The fees for starting a trust starts at $1,000 or so and averages twice that, making them more expensive than wills to set up. They are also harder to change, which you’ll probably need to do as life takes its course. Unless you are a very high-net-worth couple, don’t worry about them for now.
How to Arrange Wills, Trusts, Power of Attorney and Proxy — and How Much They Cost
The starting price for having a lawyer write up a will, power of attorney and health-care proxy starts at about $500 for the simplest will but typically runs closer to $900 to $1,200, and up to about $3,000 for really complex situations. Some attorneys charge by the hour and others charge a set fee. Ask at the outset which yours does.
Typically an attorney will meet with you briefly to take some information and answer questions. Sometimes, but not always, this meeting is comped (again, best to ask). Then she’ll give you a form to fill out at home detailing your finances, family structure, any special situations they ought to know about, and your preferences for guardians, executors, health-care proxy and power of attorney. They’ll use this information to draw up your documents.
The only people who sign the wills are you and your spouse and two witnesses. Some lawyers recommended not giving out copies of it; just keep copies for yourself and the law office and tell all the people who it would impact how to reach your lawyer and where to find your copies of it. The concern is that you don’t want to worry about the people who are affected reading it — and quibbling with your choices. Also, you don’t want to have to distribute new copies to everyone every time you make a change to the will.
Once your documents are in place, you want to review them about every five years or after major life events.
The Biggest Mistake People Make
Aside from doing nothing and having some unforeseen bad thing happen, O’Connor and Shirahama says the biggest mistake people make is using DIY legal documents found online.
Shirahama notes, “You don’t get counseling from software.” An attorney can answer questions, give advice, and tailor your will and other documents to your particular situation.
Moreover, she says, legal language is very precise. “I often have clients who come in with wills they did online and they’ve changed the standard wording, which can cause problems later on.”
How and Where to Find an Attorney for Your Will, Trust or Estate
The best way to find an attorney, says O’Connor, is to get a reference from a friend, family member, accountant or financial planner. You’ll want someone who knows the laws in your state.
If you come up short that way, the website for your state or city bar association should have a directory of trusts & estates attorneys nearby. The online legal directory Martindale can also help you find a lawyer.