Myths and Frequently Asked Questions: Estate Planning for Newlyweds

Myth 1: Jointly owning all your accounts and property means that you need no estate plan because the survivor will automatically become the sole owner of everything as a matter of law.

Fact: While it is true that the survivor may automatically become the sole owner of jointly owned accounts and property, depending on the type of joint ownership, this strategy does not achieve two important goals. First, it does not protect your accounts and property from your spouse’s creditors, and second, it provides no additional protection in case your spouse later becomes unable to manage their affairs. Also, if you have children from a prior relationship and your surviving spouse automatically receives 100 percent of the jointly owned accounts and property, you may have effectively disinherited your children without meaning to. Upon death, your surviving spouse is not obligated to give your children anything.

Myth 2: We have a prenuptial agreement, so we do not need an estate plan.

Fact: While a prenuptial agreement may address the distribution of what the two of you own upon your respective deaths or upon divorce, it does not cover other important topics, such as what happens if one of you becomes unable to manage your affairs (incapacitated). With no financial or medical power of attorney in place, your family may have to get a judge to appoint someone to act on your behalf in managing your financial matters and making important medical decisions if you are alive but incapacitated. Although the person appointed by the court will likely be your spouse, having a judge officially make this appointment will cost time and money. The proceeding will also be a matter of public record and could bring about fighting among your other family members. These proceedings are also subject to ongoing costs of administration, annual reporting, and filing requirements subject to court approval and supervision.

Frequently Asked Questions

Question 1: We just got married and have no children. Why do we need an estate plan?

Just because you marry someone does not automatically mean that they will inherit all the accounts and property from you that you want them to. Some items, such as life insurance policies, have beneficiary designations that must be changed if you want a different person to be the beneficiary. For example, you may have named a parent or sibling as the designated beneficiary on one of your accounts before you married, and now you want your new spouse to inherit that account instead. In most instances, whoever is listed as the beneficiary will receive the death proceeds when you die, regardless of your intentions. Accounts or properties that have no beneficiary designation will likely be distributed according to your state’s law. While each state’s laws may vary, in some cases, the accounts and property may be divided among your surviving spouse and other family members. Ultimately, an estate plan puts you in control of the inheritance you leave behind and allows you to leave it to anyone you want.

Question 2: We may be moving soon. Is it okay to wait until we are settled before having our estate planning done?

A move should not be a reason to put off your estate planning. While we understand that many changes occur during a move, tragedy can occur anytime. Even if you are moving out of the state, you can still accomplish some estate planning tasks that are not affected by a move, such as updating your beneficiary designations. In addition, having a medical power of attorney is a good idea, even if you will not be in the state for much longer. Life can be unpredictable, and you do not want to get caught needing court intervention should something happen to you or your spouse before the move.