I often advise clients to review their personal estate plan whenever a major life event impacts their lives, such as a marriage, divorce, birth or death. This is especially true when my client is entering into a marriage or divorce, or has a new child.
After the excitement of being surrounded by friends and family during your wedding weekend, you’ll start to recognize that this new life comes with a number of changes. When my wife and I were married last year, we decided to delay our honeymoon a few months so we could enjoy some time at home together as husband and wife before gallivanting around Italy. During that time, we settled into our new home, wrote thank-you cards to our wedding guests, and researched some of the amazing places we would soon have the opportunity to visit during our honeymoon.
We also discussed our personal finances and updated our estate plans.
Many people incorrectly assume that laws are established so that a person automatically inherits everything from his or her spouse when the first person dies. Sometimes this can prove to be a costly mistake.
In Pennsylvania, if your spouse dies without a Will and has no children, but your spouse’s parents are still alive, then you receive only half of your spouse’s probate assets and your spouse’s parents receive the other half.
This is just one example of how things may go wrong without a proper plan in place. Across the country, seminars lasting several hours are being presented on the topic of what can go wrong without a plan. My point here is simply that you should consider implementing your personal estate plan to avoid these issues.
The starting point will be your three core estate planning documents: a Will, a Power of Attorney, and an Advance Health Care Directive.
In your Will, you’ll designate who you want to inherit your probate assets and who you want to serve as your personal representative to ensure that your assets are distributed properly. In your Power of Attorney, you’ll designate someone to act as your agent to assist you with your financial and legal matters during your lifetime. In your Advance Health Care Directive, you’ll designate someone to act as your agent to assist you with your medical decisions, and also inform your loved ones regarding your final wishes if you should ever be in an end-stage medical condition.
Beyond these core documents, you should update the beneficiary designation forms for your retirement assets and life insurance policies. These are non-probate assets, and are not controlled by your Will unless you name your estate as the beneficiary. There are very good reasons (such as minimizing taxes and protecting against creditors) not to name your estate as the beneficiary of these assets.
For questions about this or any related topic, please do not hesitate to contact Estate, Trust, and Individual Tax Group co-chairs Judith A. Harris or James J. Costello, Jr. or a member of our Estate Planning & Administration Group or Taxation Group.