From the moment a couple says “I do”, their legal and financial connection takes on new meaning.
Below are tips that wise couples can use to do basic financial and estate planning.
1. Review your insurance. Newly married couples should review a few types of insurance, which include:
Many couples marry early in their careers with the majority of their earnings years ahead of them. Both spouses also often make substantial contributions to the household finances. If something were to happen to either one, the surviving spouse could be left in a difficult financial situation. Therefore, it makes sense for couples to assess whether they have a need for life insurance now that they depend on one another. It could also be a good time to buy a policy while healthy and still in a lower age bracket.
Newly married couples should also take a look at automobile insurance. If each person maintained their own car insurance policy prior to the marriage, they could save money if they merge into one policy. The savings from pricing a new car insurance policy could be put to better use on some of the other items on this list.
The couple might also want to consider insurance for their shiny new rings. Most homeowners insurance policies will let you add personal property, but it is a good idea to shop and compare prices. Sometimes a separate jewelry insurance policy will be cheaper than adding it on to the homeowners insurance policy.
2. Draft wills. Most newlywed couples enter the marriage without an estate plan or a will. Even if you do come to the marriage with a will, it is important to update that will to include your new spouse. Drafting wills is an important piece of financial planning and can help couples make important decisions such as determining who should be nominated as personal representative or executor and how the assets should be distributed. Comprehensive estate planning would also cover arrangements for children, such as naming guardians and establishing trusts to delay inheritance until an age of maturity. You could even make plans for your pets.
Drafting wills does not have to be a time-consuming hassle. When you work with an attorney that understands pressures facing young (and even not so young) couples, you can save time and money while receiving quality advice relevant to you.
3. Prepare powers of attorney and health care directives. Along with wills, an estate plan should include power of attorney forms and health care directives. These forms designate who you want to act when you are not able. A power of attorney is used to make financial decisions whereas a health care directive is used to make medical decisions. When completing these forms, newlyweds should identify who should act as back up if they cannot act for each other. They should also have a conversation about health care goals, wishes, and beliefs. In addition, signing a Declaration for a Desire for Natural Death is a part of this process – this helps you make decisions if someone is on life support. Getting these forms completed, along with wills, is the foundation of a sound estate plan.
4. Beneficiary designations. With all the commotion of preparing for the wedding and starting life as newlyweds, it can be easy to forget to update beneficiary designations. For many people, though, this is one of the most common ways in which assets pass to the surviving spouse. Each spouse should review their financial accounts – including 401ks, IRAs, brokerage accounts, and bank accounts – and update the beneficiary as needed. If the couple wants to ensure all assets pass to the other spouse if one of them should die, they should designate each other as the primary beneficiary on all their financial accounts. This is especially important because beneficiary designations will take precedence over the will. A good estate planning attorney will be sure to walk you through this process while preparing your estate plan.
5. Re-title real estate. If either spouse owned a house or other real estate before the marriage, they should consider whether they want that property to be jointly owned by them. For example, if one of the spouses owned a home that the couple will now be living in, they probably want the home to be owned by both of them. They can do this by executing a deed placing the property into joint tenancy with right of survivorship or, in North Carolina, as Tenants by the Entirety (which gives you both some creditor protection). This way, both spouses will have rights to the property and the surviving spouse will automatically inherit the property if one of them should die.
The five quick tips outlined above are a good starting point for a newly married couple to kick start their financial and estate planning. Establishing a relationship with a local estate planning attorney can be a valuable way to start good financial habits.