Estate Planning Do’s and Don’ts for Young Couples

Estate planning is often not a priority for many young married couples. However, even young couples, particularly those with young children, should have some basic estate planning documents in place.

Estate planning is not just for the wealthy or old. A comprehensive estate plan offers numerous benefits to almost every individual, including control over how your property will be distributed at death (including trusts for spouse or children), naming guardians for minor children, designating a personal representative to administer your estate, appointing agents to make financial and health care decisions for you in the event of your incapacity and reducing or eliminating estate taxes imposed at death.

Estate Planning Do’s and Don’ts for Young Couples

DO

1.  Determine Ownership of Assets

Young married couples should determine how they intend to own assets during their marriage. In common law property states, title to an asset generally determines ownership, so does a couple intend to own assets jointly or separately? In community property states, assets are presumed to be owned equally between married spouses regardless of the title, with limited exceptions. Is this what the couple intended? Clarifying this issue while both spouses are living can avoid unintended consequences (and family fights) after the death of a spouse.

2.  Name Guardians for Minor Children

Naming guardians to raise minor children if both parents die unexpectedly, as unlikely as that event may be, is probably the most important topic for most young couples. Having this issue resolved by naming a guardian in their Wills can avoid a fight among the deceased couples’ families for custody of surviving minor children.

3.  Determine Proper Beneficiary Designations

Life insurance and retirement plans may be the most valuable assets that many young couples own. However, such assets pass automatically to the beneficiaries who are named on the accounts. Such assets are not controlled by the deceased spouse’s Will. As a result, spouses must review the beneficiary designations on such assets to make sure they pass at death as intended.

4.  Create Trusts for Young Children

Rather than leaving assets directly to their children, young couples should consider leaving assets in trust for the benefit of their children until an appropriate age. Life insurance and retirement plans should also name the trust for children as beneficiary rather than minor children. Young couples will also need to name a trustee to manage the trust assets and make distributions to the children for their needs until the age set in the trust is reached by the children. Young couples should be cautious about naming a family member as trustee who has no experience handling financial matters or who is unable to say “no” to requests for money made by the children or their guardians.

5.  Include Financial and Health Care Power of Attorney

A comprehensive estate plan should also include financial and health care powers of attorney in which spouses name each other to make decisions in the event one of them is alive but incapacitated by accident or injury. Many married couples have the misconception that they have legal authority to make financial and medical decisions for each other. This is not true. Even spouses need to have financial and health care powers of attorney to avoid court guardianship in the event of incapacity.

 

DON’T

1.  Draft Own Will or Use Store Bought Forms

Drafting your own Will or buying a pre-printed fill in form is penny-wise and pound-foolish. Many attorneys will offer a free consultation and provide an estimate of fees. By not knowing what questions to ask or what technical issues that may be involved, drafting your own Will may create more problems than you are solving. Knowing that your family and assets are properly cared for is worth the cost.

2.  Name Minor Children as Beneficiaries of Life Insurance and Retirement Benefits

Naming minor children as beneficiaries of life Insurance and retirement benefits can lead to significant complications. Since minors can’t own property, life insurance companies and retirement plan custodians won’t distribute assets to minors. They will require that a custodial account be established in court until the child turns age 18 or 21 (depending upon state law). As a result, the child may be getting assets at too young of an age and extra cost will likely be incurred seeking the appropriate court order. Spend the extra time at the beginning of the process with an experienced attorney or financial advisor to make sure the beneficiary designations of life insurance and retirement plan benefits are completed properly.

3.  Believe that Estate Planning Is a One-time Event

Estate planning is often a process that evolves over time.  It is not something that can be “checked off the list” when completed and then forgotten.  As your circumstances change (your wealth grows, your children become older, you grow older), your views about your estate plan may evolve and change over time.  As a result, your estate plan may need to be revised from time to time to reflect your current wishes.  In addition, because estate tax and other laws which may affect your estate plan change over time, your estate plan should be reviewed with your advisor at least once every five years (or sooner as needed).

4.  Get Lured Into High Cost Planning

Estate planning for most young couples should be relatively simple.  For many young couples, Wills, financial and health care powers of attorney and proper beneficiary designations on life insurance and retirement plan benefits should suffice, particularly if all of the assets are owned jointly or are held in life insurance and retirement plan benefits that pass at death to the surviving spouse.  Unless the couple has significant wealth, there is generally no reason to spend thousands of dollars on revocable trusts, life insurance trusts, or other more sophisticated techniques.  As the couple accumulates more wealth and ages, the use of a revocable trust to avoid probate at death or more sophisticated estate tax planning techniques may become more appropriate.

5.  Delay

Estate planning is often one of the most overlooked planning topics for younger people.  However, even young couples, particularly those with young children, need to have the protections in place that a comprehensive estate plan can provide.

Estate planning for young couples is usually not complicated and the benefits are significant.  A comprehensive estate plan offers significant benefits to young married couples and can avoid possible conflict later down the line.

 

 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional. Hewins does not provide tax, accounting or legal services.
Dean Stange
Dean Stange

J.D., CFP® | Principal, Senior Financial Advisor

Dean Stange, J.D., CFP®, is a Principal and Senior Financial Advisor with Wipfli Hewins Investment Advisors in Madison, WI. As an attorney, Dean has provided estate and succession planning advice to business owners for more than 20 years. He primarily focuses on the ways in which business ownership, tax and estate issues can impact long-term financial planning.

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Estate Planning Do’s and Don’ts for Young Couples

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