The “I Do’s” and “I Don’ts” of Married Estate Planning

Man and woman at the alter
Estate planning - the best wedding gift.

Want to know a great wedding gift?  Estate planning. Seriously.  

Why Estate Planning Is Important

Just because you are married, that does not mean that you automatically get everything when your spouse dies. What you inherit will depend upon whether your spouse had a valid will, was survived by children from another relationship, left beneficiary designations on any assets, had contractual obligations, had a funded trust, or left an outstanding creditor obligation.

Any one of those factors can have a huge impact on your inheritance. Consider, also, that your spouse owns an undivided ½ of all the community property accumulated during your marriage.  When your spouse dies, your own community wealth is automatically cut in half. The other half – the half that belonged to your spouse – will go according to contract, will or law.

In short, your marriage certificate does not guarantee your inheritance.  If you think otherwise, then you are in for a shock.  

Building Blocks of an Estate Plan

What is the answer?  You and your spouse each need a will.  That is the basic building block of an estate plan. Then you need to get busy with the rest of the estate planning blocks. Marriage gives you additional rights, but it does not automatically void a spouse’s prior contract designations.

You and your spouse should review the ownership and beneficiary designations on every asset: stocks, real estate, life insurance, annuities, vehicles, anything else with a title.  Retitle and redesignate as necessary to coordinate them with your estate plan. Ownership and beneficiary designations can undermine the testamentary scheme in a will in a heartbeat. 

Don’t have life insurance? It may be time to get some.  When a spouse dies, one-half of the marital income dies, too. 

Find and review the buy-sell documents of every entity you own a piece of, read through every employee benefit and stock option you have available, and fill out a spreadsheet that shows every contractual obligation you have. Walk through what will happen should one of you dies. Is there a forced buy-out?  If so, what are the steps to invoke it? Is there a note or a guarantee that will accelerate and immediately become due?  Are some assets pledged as collateral?

Even more basic: review each spouse’s credit cards and other debts. Determine what, if any, the surviving spouse’s obligation will be to pay off the deceased spouse’s debt. 

Keep your initial review in mind as you and your spouse accumulate wealth and debt. Pay attention to how an asset is titled, a beneficiary designation is filled out, and in whose name a debt is taken. There is a huge potential for a costly mistake.

Durable Financial & Medical Power of Attorney

That’s all for death – now you need to think about life. If your spouse gets sick, do you have all the information and authority required for you to pay bills, borrow money, and change investments? There is no automatic mechanism in the law that empowers you to make a financial transaction on your spouse’s behalf.  Both you and your spouse need a Durable Financial Power of Attorney.

As for medical decisions, if your spouse is incapacitated then you have first dibs under the law to make the decision on his or her behalf.  Unless, that is, your spouse previously signed a Medical Power of Attorney and gave that authority to someone else.  Marriage does not void an agency document.  Just to be sure, you and your spouse should each get a new Medical Power of Attorney.

You planned your wedding.  Now plan for the rest of your life.

Virginia Hammerle is an attorney with Hammerle Finley Law Firm whose practice includes probate law, estate planning and contested litigation.  To receive her newsletter contact her at legaltalktexas@hammerle.com.