Married Couples Need an Estate Plan
Don't assume your estate will automatically go to your spouse when you die. If you don't have an estate plan, your spouse may have to share your estate with other family members.
If you die without an estate plan, the state will decide where your assets go. Each state has laws that determine what will happen to your estate if you don't have a will. In Virginia, if you are married, your spouse will receive all of your assets unless you have children who are not children of your spouse. In that case, your spouse receives one-third and your children from prior relationships receive two-thirds. The laws vary from state to state.
In addition, without an estate plan, you need to worry about what could happen if you become incapacitated. While your spouse may be able to access your joint bank accounts and make health care decisions for you, what happens if something happens to your spouse? It is essential to have backup plans. And even if your spouse is fine, depending on how your finances are set up, your spouse may not be able to access everything without a power of attorney authorizing it.
It is essential to make sure you have estate planning documents in place to avoid this. The most basic estate planning document is a will. If you do not have a will directing who will inherit your assets, your estate will be distributed according to state law, which, as noted, may give only a portion of your estate to your spouse. If you have minor children, a will is also where you can name a guardian for your children.
You may also want a trust to be a part of your estate plan. It permits you to name someone to manage your financial affairs. You can name one or more people to serve as co-trustee with you so that you can work together on your finances. This allows them to seamlessly take over in the event of your incapacity. Trusts have many options for how they can be structured and what happens with your property after your death. There are several different reasons for setting up a trust. The most common one is to avoid probate. If you establish a revocable living trust that terminates when you die, any property in the trust passes to your beneficiaries without probate. This can save your beneficiaries time and money. Certain trusts can also result in tax advantages for the donor and the beneficiary. These could be "credit shelter" or "life insurance" trusts. Other trusts may be used to protect property from creditors or help the donor qualify for Medicaid.
Another important document is a durable power of attorney. A power of attorney allows a person you appoint -- your "attorney-in-fact" or "agent" -- to act in your place for financial purposes if and when you ever become incapacitated. Without it, if you become disabled or even unable to manage your affairs for a period of time, your finances could become disordered and your bills not paid, which would place a more significant burden on your family. They might have to go to court to seek the appointment of a conservator, which takes time and money, all of which can be avoided through a simple document.
Similar to a durable power of attorney, a health care proxy appoints an agent to make health care decisions for you when you can't do so for yourself, whether permanently or temporarily. Again, without this document in place, your family members might be forced to go to court to be appointed guardian. Include a medical directive to guide your agent in making decisions that best match your wishes.
Do not assume your spouse is automatically protected if you become incapacitated or pass away.. Consult with your attorney to ensure you have all the estate planning documents you need.