At Passare, we’ve covered how couples with children are planning their estates but what about childless couples? This article from The Wall Street Journal has some useful tips.
If you are a couple with no children, the first thing you should do is determine what happens to your home and other assets after you pass away. Next, specify who will make your medical and financial decisions if you’re unable to decide for yourself.
When you have those two tasks handled, put it in writing in a Will or Trust. Without one of those documents, state law will dictate who inherits your assets.
It’s true, if you pass away without a Will or Trust, generally your spouse will inherit your assets if you have no children. But when your spouse passes away, his or her relatives will inherit all your combined assets (or the state will if your spouse has no living relatives).
“This leaves the family of the first spouse to die disinherited and out of luck,” said Sharon L. Klein, managing director of family office services and wealth strategies at Wilmington Trust. “The side that inherits depends on the random order of who dies last.”
If you don’t want to risk disinheriting your relatives or if you want to leave something to your friends or to a charity, you need to have a plan. Here are a few options to get you started:
1. “Sweetheart” Wills
The common approach for many childless couples is to create “Sweetheart Wills,” which leave everything to each other and outlines who gets what if you were both to pass away.
2. Joint Revocable Living Trusts
Another option is to transfer your assets during your lifetime or upon death into a Joint Revocable Living Trust. It spells out how your assets are to be distributed and will help you avoid probate court, which can be expensive and time-consuming. Keep in mind, the surviving spouse can still change his or her Will or the couple’s Joint Revocable Living Trust, “so your estate’s ultimate disposition is really determined by whoever lives longer,” said estate-planning lawyer Lisa Nachmias Davis.
3. Irrevocable Living Trusts
If you want even more control over where your assets end up, you can create Irrevocable Trusts either in your Will or in a separate Trust document. With an Irrevocable Trust, upon the first spouse’s death, their share can be used for the surviving spouse’s benefit – but the document can “lock in” other beneficiaries who will inherit the remaining assets upon the surviving spouse’s death.
4. Healthcare Documents
Put your healthcare wishes in writing in a Living Will or Advance Directive, and empower someone to make your End of Life decisions if you become incapacitated. Don’t forget to complete authorization forms for the federal Health Insurance Portability and Accountability Act (HIPAA) that designate a person to speak to your physician, hospital and insurance company on your behalf.
5. Have a Plan B Successor
This is where things can become complicated if you have no children. “Often times people without children struggle to find someone they trust (to handle their affairs),” said Klein. Spouses often appoint each other but it’s a good idea to have a Plan B, usually a younger person who can serve simultaneously with your spouse or in succession.
“We have seen terrible results from people only naming their spouses,” Davis said. If you can’t find a relative or friend, there are professional fiduciaries that will handle your affairs and some geriatric care managers will agree to serve as your healthcare agent. “Sometimes people are honored to be asked,” said Davis who recommends you pay whomever you appoint for their time so they “don’t start feeling resentful and helping themselves to your money or possessions.”
And if you feel really grateful, “leave them something additional when you die,” said Davis. Just be careful about revealing your intentions to a family or friend. “I’ve had cases where I was a little concerned the beneficiary might choose to accelerate the demise of the benefactor,” said Davis.
Read the story here.