In our last newsletter, we explored estate planning for our now young adult children. In this article, we move a little further in time to when that child is married but does not yet have children. What challenges should be considered as this new family takes shape?
For a young couple, the estate (what they actually own) is likely modest, or the assets are balanced by debt such as a mortgage, student loans, or credit cards. Their largest asset may be retirement accounts, employer-provided life insurance, or an anticipated inheritance.
While most estate plans involve spouses leaving everything to each other, some consideration might be given to offering a form of repayment to the parents who provided support for their education. In a sense, parents may be informal creditors, having provided the “student loan” that made higher education possible.
Even if all their property is left to the surviving spouse, what happens if the surviving spouse dies soon thereafter? The instinct may be to leave the remaining assets to one’s parents or immediate family, but that may not always be the best decision. Parents may already be managing their own estate plans or facing long-term care needs. In that case, assets could be absorbed by nursing home costs rather than going where the couple may have truly wanted. Consideration might be given, then, to directing assets to friends or charitable causes.
In a small family of just two people, it’s also important to consider who would serve as Executor if both spouses were to pass away. In trying to figure that out, they should give thoughtful consideration to family dynamics, expectations, and one’s capability to handle the responsibilities.
Young couples may want to set up their financial accounts, so they are owned jointly or with a designation that names a beneficiary upon death. This helps avoid probate, allowing assets to transfer direct by contract to the joint owner or the “Payable on Death” beneficiary. Thought should also be given to naming contingent beneficiaries should both spouses die.
Durable Financial Powers of Attorney should also be part of the plan. That way, if one spouse becomes ill, incapacitated, or simply unavailable, the other can handle matters like banking and signing tax returns. As before, naming alternates may be a bit harder, but similar considerations apply as when selecting an executor, who is expected to step in, and who is actually equipped to handle the responsibilities.
Health Care Directives such as a Living Will, Health Care Power of Attorney, and HIPAA Authorization are equally important. With a young couple, it may be quite valuable to have it explicitly clear that the spouse is to be the decision-maker, helping prevent interference from well-meaning but potentially conflicting family members.
Estate planning is often overlooked in the early stages of family life, especially when people believe they have few assets to protect. But there is more to estate planning than just passing along assets. Much of estate planning involves ensuring the right people are in place to make critical decisions if you become unable to do so yourself. Starting now makes sense. The assets will come, and the plan will be ready when they do.
Helping your child establish an estate plan often begins out of necessity. However, taking these steps now provides peace of mind and ensures that important legal and financial protections are in place. And like many tasks in life, once you start, it’s easier to keep the momentum going as life unfolds.
If you would like to schedule a consultation to discuss your estate planning needs, our team is here to help.