I thoroughly enjoyed watching the Royal Wedding of Prince Harry and Meghan Markle while nibbling on scones and sipping tea in the early hours of last Saturday morning. In both the back-story and the visuals, it was a fairy tale come to life, which is not something you see every day. All of that wedded bliss got me thinking, as many things do, about estate planning and marriage. Here are five important estate planning tips the happy couple should have thought about before tying the knot or should be thinking about now that all that wedding planning is behind them.
- Basic Estate Planning is for Everyone. If Prince Harry wants to make sure Meghan inherits all of his assets, he’d better create a Will that will ensure that happens. Your Will does not control assets on which you have beneficiaries designated (see Tip #3 below), but controls assets you own in your individual name – real estate, bank accounts, investment accounts, your car, etc. If you die without a Will, state intestate law will determine who receives your probate assets. For example, under Massachusetts law, if you have a spouse but no children, and one or both of your parents are living, your probate assets may be divided between your spouse and your parents, depending on their value. Creating Powers of Attorney and Health Care Documents are also important to make sure your fiancée or new spouse can participate in financial and health care decisions on your behalf if you become incapacitated (see Tip #4 below).
- Marriage Impacts the Interpretation of Existing Wills. Hopefully, Prince Harry already had a Will that left the considerable fortune he inherited from his mother to those he wanted to receive those funds at his death – perhaps his brother (although he probably doesn’t need the money), or his adorable niece and nephews, or maybe to the charities he supports. It is important to remember that although, in Massachusetts at least, your marriage will not automatically revoke an existing Will, it will impact how the Will is interpreted unless the Will was expressly made in contemplation of marriage. In general, if you create a Will and later marry, your surviving spouse will receive a portion of your probate estate (the assets controlled by your Will) equal to what he or she is entitled to receive under the intestate laws (see Tip #1 above), regardless of what your Will says. The intestate laws are complex and distribution of assets depends upon many factors. If you have a Will that was created before you were married and are planning to be or have recently been married, sit down with an estate planning attorney to review how your marriage impacts the distribution of your assets under your current Will, and whether any changes should be made.
- Don’t Forget to Change Your Beneficiary Designations Your Will only controls assets that you own in your individual name. Wills do not control jointly owned assets, or assets for which a beneficiary is designated, such as life insurance policies or retirement accounts unless your estate is named as the beneficiary. For many people, life insurance policies and retirement accounts are a significant portion of their assets. When reviewing your estate plan in light of a new marriage, remember to review the beneficiaries you have designated to receive these assets in the event of your death, and change them if necessary to properly reflect your wishes. Federal law protects a spouse’s right to be named as beneficiary of certain retirement plans, which is important because your marriage may revoke an existing beneficiary designation. Also, if you wish to name someone other than your spouse (for example, a child from your prior marriage) as beneficiary of that type of account, your spouse may need to consent.
- For Richer, For Poorer, In Sickness and In Health…Powers of Attorney and Health Care Proxies are important estate plan documents that appoint an individual to make financial or health care decisions in the event you are incapacitated or otherwise unable to make those decisions for yourself. If you are newly married, consider creating a Power of Attorney and Health Care Proxy to give your spouse this authority in the event of incapacity. These documents will in most cases avoid a protracted and expensive guardianship or conservatorship proceeding which is necessary when these legal documents are not in place. In addition to decision-making documents, a HIPAA Authorization gives your physician and other health care professionals permission to speak with your spouse or fiancée and is essential if you want that person to have access to information about your medical condition or prognosis in the event of an unexpected medical event. The importance of these documents in avoiding the added stress and delay associated with a court proceeding under what are often difficult circumstances for family members cannot be overstated.
- Consider a Pre-Nuptial or Post-Nuptial Agreement to Protect Assets. A pre-nuptial agreement is an agreement between two people intending to be married as to how their assets (or certain assets) will be divided between them in the event of a divorce. It may also address the rights of the surviving spouse in those assets at the death of one spouse. Although the United Kingdom does not legally recognize pre-nuptial agreements (Prince Harry (and reportedly his brother Prince William before him) have refused to sign pre-nuptial agreements prior to their marriages), courts in that country are beginning to take them into account in dividing assets. Massachusetts recognizes pre-nuptial agreements as long as they are created within certain parameters. Massachusetts also recognizes the validity of post-nuptial agreements between spouses, entered into after Pre- or Post-nuptial agreements can be particularly effective in a limited way to ensure that if either spouse receives gifts or an inheritance from a parent prior to or during the marriage, that those inherited assets will remain the property of the spouse who inherited those assets and will not be subject to division in the event of a divorce. Full disclosure of assets (including any prospective inheritance) and separate attorneys for each party are among their requirements for a valid pre- or post-nuptial agreement in Massachusetts. However, if protecting assets a party brought into the marriage or expects to inherit during the marriage is a priority, a pre- or post-nuptial agreement is an important planning option.
Death, divorce, incapacity and estate planning are issues that young couples do not spend a lot of time thinking about. However, taking the time to craft an estate plan now can go a long way toward ensuring that the happy couple will be prepared for the bumps in the road that will inevitably arise. Here’s wishing that Harry and Meghan and all of the newlyweds who will marry this summer live Happily Ever After.
Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA). For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
© 2018 Samuel, Sayward & Baler LLC