By Matthew A. Ferri, Esq. June is popular for weddings, which is appropriate as the month is named after Juno, the goddess of marriage, family, and home. And, with all that goes into planning a wedding it’s not surprising a topic like estate planning isn’t high on the list for the soon-to-be newlyweds. But it is something that should be considered when entering a marriage. This is especially true if it is a second marriage and you’re blending families.
One of the first things you may do is set up a shared bank account or put both your names on the title of your house. You’re likely setting it up through joint tenancy which can lead to unexpected problems. In joint tenancy, each person owns the entire asset, with rights of survivorship. This means the last one standing owns the property individually. You’re also not fully avoiding probate. Once all the owners have passed away the bank account, house, or whatever the asset is will go through the court process to name the new owner or beneficiary. For those reasons, there is no control over who the property ultimately passes to. In some cases, it may end up going to unintended heirs.
If you’ve decided to maintain separate accounts, you must plan to ensure your assets pass along to who you intend, because even if you have no plan, there is still a plan. Michigan’s intestacy laws will step in and dictate who inherits your assets and possessions. Those inheriting will also likely have to go through the probate process. This will take extra time and expense for your assets to go to the individual(s) deemed appropriate by the State. And the State may select someone you wouldn’t have chosen.
Another point to consider for separate accounts is naming your new spouse as your Agent. Should something happen to you, like incapacity, and you can no longer make decisions, you would want someone to step in for you. You will need someone to take control of your finances, and use them for your best interest, right? You need someone to pay bills on time or who you trust to oversee investment decisions, etc. A financial institution will only hand control over to an Agent, Trustee, or Conservator.
An Agent is someone you have named in a Power of Attorney document. It’s someone you specifically choose because you trust them to be able to take care of this aspect of your life if you are not able to do so yourself. Without a Power of Attorney, your new spouse would have to go to Probate Court to be named Conservator. This process takes time, it is overseen by Court and there is added expense. More expense than if you had planned in advance and had a Power of Attorney in place.
The same is true for healthcare decisions. You can be proactive with planning, and have an Agent named in advance. Or, your loved ones will have to apply through the court system’s process to be named before medical care providers will let them make decisions for you.
There are other advantages to making this decision in advance with estate planning, namely you maintain control. Through a Power of Attorney for Healthcare you can make certain medical decisions for yourself. For instance, should you be in a vegetative state what kind of care you would like to receive and how heroic of measures would you want. You can also complete advanced directives to give your loved ones, like your new spouse, guidelines on other types of care you would want, like long term care planning, how long you would like to stay in the home, resuscitation decisions, and so on. These are particulars a new spouse may not know about you yet. Planning in advance can help eliminate the guesswork they may have to go through otherwise.
Another role you and your new spouse should begin to consider is who you would have step in as guardian of minor children if something happened to both of you. A Guardian should be someone you trust to take care of your child(ren) and raise them in the manner you would were you still able to. Naming a guardian, and backups, in advance can allow you to leave them instructions. You can give your ideas on schools you’ve chosen, activities you’d like them to enjoy, or if you give allowance. Big issues like religion and relationships with extended family can be addressed.
Blended Families, by nature, bring more people to the table. If you’re entering into a second marriage estate planning is definitely something to consider along with your other wedding plans.
As mentioned earlier if you have assets in joint tenancy, you don’t necessarily get to choose the ultimate beneficiary. In the case of blended families that could mean accidently disinheriting your own children. If a new spouse is the last one standing on a jointly titled asset, then upon their death, their heirs would inherit solely, unless planned for otherwise.
As for separately maintained assets, you most likely designated your ex-spouse as the beneficiary of your life insurance policy, pension plan, 401(K) plan, or similar retirement plan, provided by your employer. If you fail to plan or update your beneficiaries your ex-spouse may inherit upon your death.
Your ex-spouse can also play a role similar to the ones above. Should your children inherit your estate while they are still considered minors the probate court would likely name someone to manage the inheritance. That person might be your ex-spouse.
If you want to. . .
. . . while avoiding a probate court process and minimizing your taxes, a proper Estate Plan should be among your considerations as you plan for marriage. An estate planning professional is a great resource to help ensure these aspects of your plan are covered. He will ensure that your plan works in the way you want it to. To schedule a complimentary initial consultation that covers how our approach to estate planning can benefit you, please contact our office at (248) 409-0256.