Are you getting married? Do you have a child or a loved one getting married? “Big life events” like marriage may have an impact on your estate plan. I often encourage individuals to utilize such events as a springboard to pull out the ol’ estate plan, take a look, and ensure that what you want to have happen will happen.
I get it, I get it – getting married is supposed to be happy, exciting, fun, full of smiles and laughter, … and here I am – bringing up something borderline morbid. Though, I do not suggest bringing up “estate planning” as a talking point on the Honeymoon – I do recommend, it go on the to-do list soon thereafter!
The following is a series of topics/considerations – marriage is the common denominator. Whether you are a future bride/groom; a newlywed; your child/loved one recently got married; or you have been married for decades – I hope you find this hodge-podge of information helpful.
- What’s the deal with a “Pre-Nup” (aka Pre-Marital Agreement)? This term gets tossed around often when discussing a prospective marriage; though it is incorrectly assumed that it only comes into play in the event of a divorce. While it does deal with what happens to assets in the event of a divorce, it also is a way to control assets after you pass. In Indiana (and in most states), there is a little thing called Spousal Election, which essentially means you cannot totally “disinherit” your spouse. He/she is entitled to receive a portion of your estate unless a Pre-Marital Agreement is in place and binds the parties to not “take against each other’s Wills.” Another fun tidbit: Many do not realize that there is a little thing called a “Post-Nup” (aka Post-Marital Agreement) which is virtually the same as a Pre-Nup, but is done after the marriage!)
- Taxes are a second consideration with marriage. In “our” estate planning world, we often get asked about estate taxes and gift taxes. The annual gift tax exemption (that is, how much you are allowed to gift per person, per year without tax reporting) is $15,000 while the lifetime gift tax exemption is $11.2 million (that is, how much you are allowed to give over a lifetime per person before there are tax implications). When you marry, you get double the amount – so double the fun! So, a married couple may gift $15,000 each (total $30,000) per year with no reporting requirements; a married couple may also gift $11.2 million each (total of $22M +) over their lifetime with no tax implications. Concerned about gift/estate taxes anymore? Yeah, me neither.
- If a beneficiary predeceases you, does their share of your estate “have” to go to their surviving spouse? (The infamous, “Does that daughter-in-law/son-in-law get my stuff?!”) The quick answer: absolutely not. A well-drafted estate plan will accommodate such an unfortunate event and it usually either goes down to the beneficiary’s child(ren) or to the remaining listed beneficiaries. So, for example, if Child A, B, and C are the beneficiaries of your Will and Child A predeceases you, the most common distribution pattern is that either Child A’s child(ren) would inherit –or—Child B and C would inherit. Though, it does not “have” to go to anyone – not the predeceased beneficiary’s surviving spouse, not the predeceased beneficiary’s child(ren), not even the remaining beneficiaries – the beautiful thing about doing an estate plan is you get to choose! Want predeceased Child A’s share to go to the “Basset Hound Rescue of America” – go for it (just need to make sure it is specifically stated!).
- Do you need to change beneficiaries on assets? What about your existing estate plan? Remember when you first started at your employer, they handed over some paperwork to fill out for their retirement program and/or life insurance? That paperwork likely included a form to designate beneficiaries. Or remember when you were wise beyond your years and created a Power of Attorney, Health Care Representative, and Last Will and Testament upon attaining the age of eighteen? Maybe you listed Dad and Mom as your Power of Attorney and Health Care Representative, and even your Will’s beneficiaries? If you get married, it is common that you’d want your new spouse to be your Power of Attorney, Health Care Representative, and/or beneficiary. It is vital that you get these documents updated appropriately to ensure that your new spouse is listed.
Getting married is certainly not the only “big life event” that could impact an estate plan – having children, your children having children, retiring, receiving an inheritance, a beneficiary predeceasing you, etc. etc. I could entertain you for hours with stories of individuals who did not update their estate plan when a “big life event” had occurred.
Unfortunately, it often does not end well for the family as the individual’s goals in their estate plan may not end up occurring. Therefore, it is vital to remember – if a “big life event” occurs, consider how it may impact your estate plan.
If you want to review your current estate plan and get it updated, or are considering starting the process, join us for a FREE workshop "Stop the Family Fight Before It Starts - just click here to find out more and RSVP.
Jennifer Rozelle, JD