Today’s millennials are getting married later in life, if at all. In fact, the younger generations are saying “Not Yet” more often than not. What does that mean for you and your fiancé? It means trouble when it comes to your estate and that your estate planning needs to be different than those of married couples.
This philosophy of saying “Not Yet” reminds one of the Bible’s original love triangle of Jacob, Leah, and Rachel as told in Genesis 29. Tricked by his father-in-law into marrying his true love’s sister, Jacob waited 14 years before he could be with Rachel. The key work here is “tricked” — maybe that how some Millennials feel about marriage — it’s a big fat trick! And one they don’t want to participate in, quite yet.
Regardless of their reasons for not rushing to tie the knot, millennials and others extending their engagement need to understand estate planning. Estates deal with two major areas of the law – probate, gift and estate tax law. Probate laws govern the distribution of your property after your death. Whereas gift and estate tax laws govern the taxation of the property you transfer to others. Both of these should be of concern to engaged couples as those laws protect and favor married couples, but don’t yet apply to you.
What could be the result?
Well, your fiancé could lose everything you both share. Your next of kin would have authority to dispose of your estate in their own chosen way. And taxes can take a big chunk out of the bequest you leave your beloved. Long story short, your fiancé could be left out of all financial and medical decisions if you become seriously ill or incapacitated, and totally left out if you die.
Estate planning concerns for engaged couples can be broken down into these major areas:
- Probate – Your fiancé has no automatic legal right to inherit your estate unless you set up a will. Otherwise, your estate will go to your next of kin.
- Gift and estate taxes – Because you can’t take advantage of the unlimited marital deductions, your estate may be heavily taxed on any amount you leave to your beloved Property you hold as joint tenants with rights of survivorship will not necessarily escape estate taxation. Gifts you made to your beloved during life may also be taxable.
- Illness and incapacity – Without a durable power of attorney for health care (DPAHC), medical professionals and/or your fiancé’s family may exclude you from medical decision making or even visiting your beloved if he or she becomes seriously ill or incapacitated. Without a durable power of attorney for finances, you have no authority to manage your beloved’s financial affairs as he or she would want.
Another concern is if you already have a will in place and choose to change it now that you are engaged and want to include your fiancé. This is a smart idea as successful will challenges are hard to mount. Someone contesting your will must prove that it was executed incorrectly, that you were unduly influenced or not of sound mind when you made it, or, that it was the result of fraud. Here are some tips to ensure your will change will not be challenged:
- Pass as much of your estate through probate-avoiding mechanisms such as JTWROS, beneficiary designation, and living trust
- Mention every member of your family in your will
- Add a “no contest” provision to your will
- If you have a debilitating disease, prepare your will early to ensure that there is no question that you were of sound mind and body when you make it.
- Make sure you will is executed properly
- Share you plans with your family in advance.
Knowing the ins and outs of estate planning for engaged couples can be daunting. Don’t try to do this yourself. Consult an experienced estate planner to guide you. It’s a decision that will pay off in the end for both you and your fiancé.
Sources: Broadridge Investment Management Solutions
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