Read this list of FAQ that married couples should be thinking about when it comes to estate planning.
Estate planning is an important step for any individual, but it becomes even more important when family is involved. Married couples can take a big step in planning for their family’s future by setting up an estate plan, but planning for two isn’t always as easy as planning for one and one. Here are a few common questions married couples may have when planning or maintaining their estates.
Should we have joint representation?
Joint representation for estate planning is sometimes a more complicated issue than it seems. Even as couples are joined in sickness and in health, they are sometimes not on the same page in terms of estate planning, especially when it comes to second marriages or couples with children from previous relationships.
When considering the best route for estate planning, it’s important to remember that separate planning is sometimes simply the best plan of action for a couple’s finances. In some cases, such as when couples are married later in life or have major differences in previous wealth or ideas on how to disperse property, separate representation probably makes sense.
Joint representation is typically best suited for long-term couples without previous spouses or children. Working with one lawyer on estate issues can help communication in planning for the future, and it is also more financially efficient than using separate lawyers. It also makes it easier to distribute assets in a concerted way, because the same attorney is working with all of the available assets.
Estate planning can be a divisive issue for some families, so it is important to make pragmatic decisions regarding how your planning will be handled. Joint or separate representation does not have to be divisive in itself; rather, each can have benefits or drawbacks, so it’s important to discuss which option will be better for your situation.
How does my spouse factor into my will?
Your spouse’s role in your will is typically designated as clearly as anybody else’s, with some exceptions. In general, you should designate your property to your spouse just as you would designate it to anyone, although not all property has to pass through a will. Jointly owned real estate, bank accounts, and securities automatically pass to the surviving spouse. If you would like your spouse to benefit from life insurance or retirement plans, you should designate them as the beneficiary, as those assets pass automatically as well. Property remainders also frequently pass to spouses through residuary clauses.
Spouses typically have a larger impact on revocable estate plans, which are a major part of many estate plans and help minimize estate tax costs during property dispersal. Most trusts distribute property in a way that is optimal for low estate tax costs, factoring in state taxes (which Virginia currently erases through credits) and federal taxes (which can change frequently). Certain trust structures also determine how your spouse receives payments.
Are there estate tax benefits to being married?
The federal estate tax applies only to fairly large estates, with the exemption set at $5.25 million. If the total amount falls below that, estate taxes are not a concern.
For estates larger than that, recent laws have changed the tax implications for transferring property. In the past, spouses had access to exemptions of a certain amount, in addition to being able to transfer unlimited amounts to their spouses in life and after death. However, the unused exemptions could not be transferred to the other spouse after death, meaning that property would have to go into a family trust or the amount above the exemption would be taxed after the second spouse’s death. Under the American Taxpayer Relief Tax Act of 2012 (ATRA), spouses can now transfer their exemptions, meaning that the surviving spouse can take advantage of all of the unused exemption.
If you would like to get help with your estate planning, Virginia residents can contact our law firm located in Vienna, VA to schedule a consultation.