Have you ever heard of something called a “sweetheart will”? It’s an estate plan that says, essentially, when one spouse dies, the other one gets everything. Sweetheart wills seem like the perfect solution for so many couples who plan to be together until death-do-us-part, because they’ll transfer all the assets right away–right?
Unfortunately, even a sweetheart will often fail the surviving spouse because it is not a comprehensive document that considers all areas of their complicated lives. A document that’s too simplistic can cause greater complications when one spouse passes to the other side. After all–if I’ve learned anything in my time as an estate planning attorney, it’s that people don’t always die in the order they’re born or at the age you expect.
Both spouses require an estate plan created by a competent attorney, someone who practices regularly in this area of the law. Here are some common misconceptions that you should avoid:
You’re not automatically your spouse’s power of attorney. This depends on the laws of your state. You probably assume that if something happened to your spouse and they needed emergency medical care or someone to make their financial decisions, you would have automatic power of attorney. This is not true in every state.
Some states consider an entire “party of interested persons” to make medical decisions. This can be complicated, take time to assemble, and create difficulties in contacting people. To be sure you have your spouse as your power of attorney–if that’s what you want–you need to have a document written by an attorney.
All assets don’t automatically pass to the spouse just because you’re married. There are many ways to set up your accounts so they transfer automatically. If the account has a beneficiary, it will pass directly to this person.
These days, people marry later, or marry multiple times, or they get married but choose not to merge their finances together. All of these circumstances lead to accounts with the wrong person named as beneficiary. Some states have laws that help prevent accounts from passing directly to an ex-spouse, but not all of them. It’s important to reassess your beneficiary designations at every life stage, so your mother isn’t inheriting before your spouse.
Nothing overrides beneficiary designations. They can truly make or break a good plan. When it comes to beneficiary designations, there is no probate court to decide to make things fair or set things right–the money passes directly to the beneficiary, no questions asked.
One of the easiest ways to ensure an easy transition is to have joint-ownership or transfer-on-death accounts. Both of these situations will allow the surviving spouse to either keep the money in the same account or receive it directly with the presentation of a death certificate.
You may go through probate for your spouse’s estate. Many people mistakenly think that they can avoid probate because everything will transfer automatically. But if one spouse owns assets in their own name or doesn’t have an automatic distribution plan for an asset they own with someone else (including his or her spouse), you may end up going to probate court. This could lead to frozen assets and a monthly allowance while the estate is settled in court. One way to avoid probate in some states is with a revocable living trust, but it’s not always necessary in every state. Other states have documents such as Community Property Agreements that are valuable tools for the automatic transfer of assets when one spouse dies. A good attorney can advise whether a revocable living trust or other nonprobate tool is right for you.
You may need to probate your spouse’s estate if the Will requires it. One of the benefits of having a good plan in place is that it is unique to you. It may include important tax planning provisions or gifts to individuals outside of the spouse. If a Will includes bequests to other people or creates the funding of a trust for the benefit of the spouse, in order for those transfers to occur, the Will will have to be probated. It is important to consult with an attorney to see whether this applies to you as there can be easily missed deadlines and timeframes.
When one spouse dies, it’s time to update the will (and beneficiary designations). Making a will is never a one-and-done situation. I know that when a spouse dies, redoing the estate plan is one of the furthest things from someone’s mind. But it’s important to keep it on the list and to update the plan when you’re ready, because if the deceased spouse is named as beneficiary on several accounts, it’ll be messy for the people you leave behind.
There truly is never a good time for a DIY estate plan. Even the seemingly simple situation where each spouse wants the other to inherit everything can be fraught with complications, especially without an attorney to review the accounts and assets.
Most importantly, if both spouses die at the same time, and there is no will or simply a sweetheart will, the estate will require a lot more work on the attorney’s part, meaning the attorney will cash in while your loved ones pay the price.
If you love your spouse, don’t leave them with confusion or a mess. It’s an act of love to create an estate plan that will allow your spouse to focus on healing after a death–rather than on the paperwork and the details. Head to Side by Side Planner to learn more.