ESTATE PLANNING FOR
In contrast to individuals without spouses, married couples typically rely on each other for financial support. Accordingly, it becomes important after marriage for individuals to plan their estates in order to ensure that their spouse (and any children) are adequately provided for in the event of disability or death.
Along with marriage comes legal and financial status changes, such that spouses can file joint taxes and are bound by laws regarding the disposition of property upon their death. A spouse’s right to inherit the assets of a deceased spouse depends on whether the married couple lived in a state governed by community property or equitable distribution laws. For those residing in community property states, which include California, Texas, Arizona, Wisconsin, Louisiana, Washington, Idaho, Nevada, New Mexico and Alaska, the surviving spouse is entitled to receive his or her deceased partner’s portion of marital assets (generally, property shared and jointly owned between spouses), and the remainder of the deceased spouse’s separate property (generally, property owned as an individual, to which the spouse has no ownership rights under law) is divided according to his or her will. In equitable distribution states, which include the remaining states, the surviving spouse often has a legal right to share in a percentage of the deceased spouse’s entire estate upon death.
It is important that married couples understand the specifics of how property may be required to be divided upon death, as well as the gift and estate tax benefits available only to married couples, when creating their estate plans. Specifically, there is no federal or state estate or gift tax on transfers between United States citizen spouses, whether during lifetime or at death (this is called the marital deduction). Those gifts and bequests can be outright transfers or can be made via trusts (although not all types of trusts will qualify for the marital deduction). There is no limit on the amount that may be transferred. The vast majority of married couples needing estate tax planning combine the estate tax exemption granted to each person with the unlimited marital deduction to assure that no estate taxes are payable until the death of the surviving spouse.
Married couples typically plan their estates in consult with not only a trusts and estates attorney, but with each other. Couples with minor children should execute wills that designate a guardian for their children and, in some circumstances, a trustee to manage the children’s inheritance. Spouses often name each other as Executor under their wills; that is, the person who is responsible, upon the individual’s death, for taking inventory of property; preserving the estate; paying creditors, administrative expenses and any death taxes; and disposing of the remainder of the individual’s property among his or her beneficiaries. Spouses may be advised to own property jointly with a right of survivorship or in revocable trusts in order to avoid the often onerous and expensive process and ease the transfer of assets after death.