When to Start your Estate Planning (Part I)
Estate planning is a valuable process that everyone should complete. Many think that estate planning is only for the rich, but this is not the case. Wealthy people use estate planning to minimize estate tax, to transfer assets and businesses efficiently, to donate to charities, and to achieve other valuable goals. These goals may not apply to everyone, though they might, in a state like New Jersey estate tax can affect even those of modest means. Apart from these types of financial goals, estate planning is useful to protect your family in case you become incapacitated, ill, injured or deceased. It can protect the assets you have from creditors. It can grant you access to valuable government services, and it allows you to appoint a guardian for your children, as well as set aside funds to raise your children if you aren’t around. These are just a few of the many goals that you may have for your estate plan. No matter what your goals, an estate plan is a modest investment that can provide large benefits to you in the future. The question that remains is when you should make this investment and begin your estate planning. The quick answer to this is to say as soon as possible. In this article we will look at some times where starting your estate plan can be particularly important.
In a Long Term Relationship
We begin with a situation where not planning ahead can make a big difference. If you are unmarried in a long term relationship, ordinarily your partner does not have any standing if you die or become incapacitated. Under intestacy laws, a boyfriend or girlfriend does not inherit. They also do not get priority to be a health care proxy. If you want your significant other to inherit from you, or make medical decisions for you, you need to create a few simple documents that say just that. How you title your property can also make a big difference in these situations. One big example is if you and your partner own a home. If you have it titled as joint tenancy with right of survivorship and one of you passes away, the other maintains ownership of the property, even if there is no will in place. If the property is independently titled, and the party under whom the property is titled dies, then you run into a situation where the surviving partner has no claim of ownership without a will, and is now at risk of being evicted. There are a number of other potential issues that can come up in this type of situation, especially if children are involved, that planning ahead can solve. It is for these reasons, estate planning is good insurance for unmarried people in long term relationships.
When a couple gets married, there is often quite a bit of estate planning to do. The rules of intestacy usually does give all of a person’s assets to their spouse. This can cause issues if you have other people who are dependent on you, for example a parent or special needs sibling. In those cases, intestacy laws will not leave them anything, a will or trust will be required. This is also the case for a health care proxy; if you don’t want your spouse making your medical decisions, then you’ll need to draft a document giving someone else these powers. If you and our spouse have separate assets, you will want to get financial powers of attorney so that you can be able to make sure you can continue to pay bills should you become incapacitated. If this is a second marriage, especially if children are involved, the value of estate planning increases dramatically. Couples commonly use prenuptial agreements to keep certain assets separate. Parents often want to keep certain assets separate for their children from before the marriage and, under certain conditions, a couple can maximize marital estate tax exemptions to lower estate taxes. Most commonly, a married couple will get reciprocal sweetheart wills that leave everything to a surviving spouse and names guardians for their children. This is a good start, though estate planning these couples can accomplish goals such as protecting assets from creditors, leaving assets to children safely, and minimizing taxes, among other goals. Marriage changes the defaults for inheritance and medical decisions. Because of this, it’s valuable to talk to an estate planning attorney to make sure these new defaults are what you want. Also, these defaults do not minimize taxes or get things done most efficiently.
In Part II of this article we will look at a few other situations where starting your estate planning is particularly valuable.