What is an Estate Plan?
- A Last Will and Testament to specify how you would like your assets divided after death, and to choose an executor to administer your estate.
- A Health Care Directive, also known as a Living Will, to provide guidance to your family and to health care professionals on your medical treatment preferences if you become incapacitated and are no longer able to communicate for yourself, and also to appoint a health care representative to make decisions for you.
- A Durable Power of Attorney to appoint an agent to handle your finance, real estate, or business matters if you become unable to do so. In other words, it gives that person the power to act on your behalf.
- An End-of-Life Plan to formally establish your end-of-life wishes, such as your arrangements regarding your obituary, epitaph, remains, funeral, and more.
Purpose of Estate Planning
- Control who receives your assets after death
- Ensure your family is provided for financially
- Specify guardianship for children or pets
- Specify personal medical treatment preferences
- Give thoughtful instructions in your absence
- Spare your family confusion, cost, or time by allocating your estate
- Lessen estate taxes or legal fees
- Streamline the passing of assets to beneficiaries or your spouse
- Choose a person you trust to administer your estate
- Reduce the stress of funeral planning
Estate Planning and Marriage
Separate and Shared (Marital) Property
- Property acquired prior to marriage or property that both spouses agreed was separate before marriage in a written Prenuptial Agreement
- Gifts/inheritance given to one spouse before or after marriage
- Personal injury proceeds
- Property acquired/bought using money either spouse earned during marriage
- Active income earned, or the appreciation of assets due to marital efforts
- Property given to both spouses during marriage (e.g. wedding gifts)
- Separate property that has been mixed with marital assets, such as depositing an inheritance into a joint bank account, or adding a spouse’s name to a property deed for property acquired before the marriage.
Community Property and Equitable Distribution States
Community Property States
- New Mexico
- Alaska (if both spouses agree on making assets community property)
In community property states, debts are shared by both spouses. If the debts of the marriage exceed the worth of marital property, these assets will need to be used to pay off the deceased’s debts before any property can be transferred to the surviving spouse.Debt accumulated before marriage, such as a student loan, is typically kept separate from community debts.
Equitable Distribution States
- Income of each spouse
- Age/health of surviving spouse
- Earning potential of spouse
- Financial contributions of spouses to marriage or to the other spouse
- Length of marriage
- Standard of living
- Amount of property contributed to the marriage
- Financial needs of dependent children
In states that follow equitable distribution rules, debts are classified similarly to separate and shared property. Individual debts are usually kept separate, and are solely the responsibility of that spouse. If debts were accumulated due to marital necessities, such as school fees for children or a mortgage on a family home, then that debt is shared between partners.
Estate Planning with a Spouse
- Who will be the guardians of your minor children and pets
- If you want to bequeath gifts to specific individuals
- If you want to jointly own property to avoid probate and ease the transfer of shared assets after death
- Who do we know that is capable of caring for our children emotionally, physically, and financially?
- Is this person dependable? Do they have enough energy to devote to this responsibility?
- Do we trust this person to raise our children? Do their beliefs and values match our own?
- Does this person have a relationship with our children? Would our child feel comfortable living with this person(s)?
- Does this person have children already? How would our children fit into the mix?
If you and your spouse do not have any dependent children, or only have adult children, you won’t need to name any guardians to act in your stead.
- Joint bank accounts
- Real estate (e.g. marital home)
- Business assets, if you are co-owners
- Income that is earned during marriage
- Goods acquired with money from a shared account
- Gifts given to both of you
- Close friends
- Parents and in-laws
- Extended relatives (e.g. cousins)
- Organizations, clubs, or charities you are involved with
- Business partners or colleagues
Transferring Property Outside of Probate
- Simplified estate distribution
- Lowered cost
- Direct transfer to co-owner, ensuring property gets placed in the right hands
Tenancy by the Entirety
Health Care Planning
- First, if you become incapacitated or ill, you may not be able to consent to certain treatments for yourself. A Health Care Directive gives you the ability to document your wishes on paper for health care professionals to refer to in such an event.
- Second, having a written record of your preferences can prevent your loved ones from having to make difficult health care choices for you.
- Your views on your desired quality of life
- Your thoughts on artificial life support, artificially administered food and water, and comfort care if you have a terminal condition, enter into a coma, or you are in a persistent vegetative state
- Your opinions on surgeries, blood transfusion, or organ donation, etc.
Storing Your Documents
Updating Your Estate Plans
- Birth or adoption of a child
- Death of a beneficiary or guardian
- Marriage, separation, or divorce
- Birth of a grandchild
- Your executor becomes ill or passes away
- You acquire significant assets or incur significant debts