Personal Finance Essentials
Estate Planning for Married Couples
Richard Left Everything to His Wife.
His Kids Got Nothing. Here’s Why.
Estate planning is not only for the elderly or the wealthy. Every married person needs a will, powers of attorney and a clear understanding of how their assets will be transferred. Without these documents in place, the law – not your wishes – will determine what happens.
Why “Simple” Wills Often Are Not Enough
Most married people write a simple will that leaves everything to their spouse, or to their children if the spouse dies first. This approach has appeal – it is easy to understand and easy to execute. But it carries risks that become apparent only when circumstances change.
Consider this sequence: Richard and Ashley have two children. Richard dies and leaves everything to Ashley. Ashley remarries Tom, a widower with three children of his own. Ashley then dies, leaving everything to Tom. Tom later dies and leaves everything to his three children. Richard’s children receive nothing.
A better approach is for Richard to leave his assets to a trust rather than directly to Ashley. The trust provides Ashley with full access to the assets during her lifetime – just as if Richard had left everything to her outright. But because Ashley does not “own” the assets, she cannot bequeath them to a new spouse. When Ashley dies, the trust’s assets flow to Richard’s children. This protects the children without restricting Ashley’s access while she is alive.
Estate Laws That Favor Married Couples
Surviving spouses enjoy significant legal protections that unmarried partners do not. By law, a surviving spouse is entitled to receive the deceased spouse’s retirement assets – even if the will says otherwise, and even if someone else was named. Unmarried partners, regardless of the length or depth of the relationship, have no such protection.
If you die without a will and without being married, your parents are likely to receive your assets – not a long-term partner, not a fiancé(e). If you have a non-married partner and want that person to inherit from you, you must have a will. There is no substitute.
Protecting a Non-Married Partner
An unmarried couple has no automatic legal standing when it comes to inheritance, financial decision-making or medical authority. If one partner dies without a will, the surviving partner may be left with nothing – even after years together. Two documents are essential: a durable power of attorney (to manage financial affairs if you become incapacitated) and a health-care power of attorney (to make medical decisions on your behalf). Without them, an unmarried partner has no legal authority to act, even in an emergency.
Titling Your Assets and Designating Beneficiaries
Your will controls only a portion of your assets. Many assets pass outside the will entirely – through beneficiary designations or the way accounts are titled. These include IRA accounts, retirement accounts, annuities, life insurance policies and joint accounts. Whoever is named on those forms receives those assets, regardless of what your will says.
A Transfer on Death (TOD) or Payable on Death (POD) registration allows you to name heirs directly on brokerage, mutual fund and bank accounts. This transfers assets to your heirs without going through probate and avoids certain capital gains complications that can arise with joint registrations.
When you or your spouse changes a name – for example, upon marriage – update every investment account, retirement account, insurance policy and legal document to reflect the new name. Failing to do so creates access problems, beneficiary confusion and potential complications with estate distributions.
Power of Attorney and Health-Care Documents
A Durable General Power of Attorney allows a spouse to manage your financial affairs – paying bills, selling securities, filing taxes – if you become incapacitated. A health-care power of attorney gives them the legal right to make medical decisions on your behalf. Executing these documents now, while you are healthy, prevents the courts from appointing someone you would not have chosen.
Don’t Keep Your Estate Plan a Secret
Even the most carefully crafted estate plan can create family conflict if no one knows what it says. When family members – including spouses of your children – are left to speculate about your intentions, disputes arise. Items disappear. Relationships fracture. If you have specific wishes about who receives particular assets or heirlooms, communicate those intentions clearly and directly. Silence is not neutral – it is an invitation to conflict.