Whether you are currently single, just married, or married for many years, you should know that your marital status affects how your estate will be distributed. In Utah, there are many laws related to inheritance rights and property rights that apply differently to married couples than to single people.
Spouses and Inheritance Rights
If someone do not have a will and passes away, his or her spouse will most likely inherit part or all of the estate. This is because spouses are high in the order of intestate succession, a list of who inherits if the deceased person does not have a valid will. Spouses receive the entire estate if their deceased spouse had no surviving children, parents, siblings, or nieces/nephews of deceased siblings. If there are surviving children or other relatives, the spouse inherits either one-half or one-third of the estate. Note that the spouse’s share of the estate to which we refer here consists of the deceased spouse’s separate property.
When someone is single, the order of intestate succession is different. Children and parents may inherit depending on who survives the deceased person. The same is true if a marriage has been officially dissolved through divorce or annulled. People who want to make specific gifts of property and assets to their relatives and friends should not rely on intestate succession. Preparing a will allows you to express your wishes for disposing of your estate.
Spouses and Property Rights
Being married affects property ownership too. Utah is a community property state, meaning that property acquired or money earned during a marriage is treated differently than property the spouses held before marriage. If a couple gets divorced, the community property may be split 50/50. For intestate succession purposes, a spouse inherits the half of the community property previously owned by his or her deceased spouse.
The concept of community property matters little for people who are single. They own all their property themselves and can dispose of it in their will or other estate planning devices. People who are married may run into problems if they transfer community property without the other spouse’s knowledge or permission, or if they give community property to another heir in a will or trust.
Spouses and Taxes
For many couples, the tax implications of marriage are very important. Spouses receive the marital deduction, benefit from estate tax portability, and may have tax breaks on their yearly returns. Single people do not receive these benefits.
Name a Guardian for Your Dependents
If you or your spouse pass away, custody of any minor children remains with the surviving parent. However, to prepare for the possibility of you both passing away, appoint a legal guardian in your
• Last Will and Testament. This ensures that your children get the care you want them to.
• Choosing a legal guardian for your kids takes a lot of thought. As a couple, determine the criteria for an ideal caregiver. Review your list of potential candidates and discuss the responsibilities with your chosen guardian.
• Update or create your Last Will to include the names of your children’s guardian(s). Without an updated will, the courts will decide who becomes responsible for their care after you die. You may also want to name a caretaker for any pets, and set aside a portion of money for their care.
Naming Your Children as Beneficiaries of Your Estate
It’s likely that your children will be the main beneficiaries of your estate. Consider how you want their inheritance to be managed. For instance, you can create a testamentary trust that is managed by the executor of your Will until your children reach adulthood. You can appoint the same person to both executor and guardian duties. However, choosing different people may ensure that your children’s new guardian manages their inheritance appropriately.
Consider Shared Property and Its Distribution
Marital property is the property you share with your spouse and is jointly owned between the two of you. For instance, marital property often includes:
• Property purchased with money earned during your marriage (e.g., real estate)
• Property that is held by the couple as joint tenants with a right of survivorship
• Gifts from family or friends that are meant to be shared equally between you and your spouse (e.g., wedding gifts)
• Active appreciation of assets (i.e., separate property that increases in value due to marital contributions)
Transferring Shared Property
You cannot transfer shared property to another person in your Will as long as your spouse survives you. If you pass away, anything you two owned jointly will go directly to your spouse. As well, if you’ve named your spouse as a beneficiary for any insurance policies or retirement plans, you cannot name a different beneficiary for those benefits in your Will.
However, you can talk to your spouse about who you’d like to inherit shared property and assets once you both pass away. Some couples choose to create Mirror Wills, which are separate documents that look almost identical except that they list each other as their main beneficiary. Mirror Wills typically describe the same distribution plan in the event that both spouses die. People who create them often leave the entire estate to their children or other named heirs.
Another option is to set up a shared Living Trust (also known as a Revocable Living Trust or a Grantor Trust). A Living Trust avoids the public probate process, which means that assets transfer to beneficiaries or heirs much quicker than with a Last Will. Married couples who create a Living Trust together typically act as co-trustees while they are both alive. When one spouse dies, the surviving partner inherits the other’s share. When both spouses die, the property passes to the named heirs.
Consider Separate Property and Its Distribution
Separate property is property owned as an individual; your spouse has no ownership rights to it. For example, separate property can include:
• Assets identified as separate in a Prenuptial Agreement
• Gifts or inheritances meant only for one spouse
• The proceeds from personal injury claims
If you created a Prenuptial Agreement before getting married, you may already have an idea of who you want to inherit certain assets. For example, you may want a family business to be passed on to someone with a vested interest rather than to your spouse by default. You can designate any specific assets to your ideal beneficiaries in your Last Will.
Alternatively, a Living Trust also allows you to allocate separate property. In this case, you may choose to designate a co-trustee to work with your spouse when dispersing separate property after your death. With a Living Trust, you can ensure your spouse is taken care of and your chosen beneficiaries inherit what you left for them.
Select an Executor and Attorney-In-Fact
When creating a Last Will and Testament, you’ll need to choose at least one executor to distribute your assets, close your accounts, file your taxes, and wrap up your financial affairs after you pass away. If you and your spouse create Mirror Wills, the executor should be the same person for both documents.
Some couples choose to appoint each other as the executor of their Will. While you can name the same person as a beneficiary and executor in your Will, you should consider naming an alternate executor to prepare for the possibility of your spouse predeceasing you.
Another important step in estate planning is appointing an attorney-in-fact with a Power of Attorney. An attorney-in-fact has the authority to manage your legal and financial affairs if you’re absent or incapacitated. Some situations may not allow your spouse to make legal or financial decisions for you but you can guarantee their authority over your affairs by creating a Power of Attorney.
Determine Your Medical and General Care Preferences
When you’re married, health care professionals will often defer to your spouse for health care decisions when you can’t make them yourself. However, to be certain your spouse has the authority to make health care decisions on your behalf, appoint them as your health care agent (also known as a proxy). Likewise, you should clearly document your preferences regarding certain health care treatments.
Our Living Will gives you the option to combine a Health Care Directive with a Medical Power of Attorney so you can accomplish both these tasks with a single document.
Although you and your spouse may still have ample time to plan, you should start thinking about:
• How you want to spend your senior years
• How you want your life to be celebrated once you pass away
• What you want done with your remains
Execute and Update Your Estate Plan
Once the essential documents of your estate plan are in place, make sure they stay up-to-date and accurate to your current life. Review your estate plan whenever a significant life event happens (such as after a divorce, the birth of a child, or the loss or gain of a major asset) and update it accordingly.
As a married couple, it’s important to make your estate wishes clear to each other while simultaneously supporting each other’s goals. Working together and being straightforward is essential for successful estate planning.
Revocable Living Trusts
A revocable trust can hold the couple’s assets. If one spouse contracts dementia or Alzheimer’s disease, the other spouse can continue to manage the assets under the terms of the trust. Sometimes, an incapacitated spouse may need assistance at home, in an assisted living facility, or in a skilled nursing home. The trust can be drafted in such a way to allow for planning to qualify for government assistance such as Long Term Care Medi-Cal and Veterans Aid and Attendance benefits in that eventuality. See the Medi-Cal planning page of our website for more information about this.
Durable Power of Attorney
If the well spouse attempts to contact the HR Department of the ill spouse’s former employer, the Social Security Administration, the IRS, a credit card company that issued a credit card to the ill spouse, or even a utility company where the account was set up by the ill spouse, the well spouse will usually find it impossible to talk to these agencies or companies. A durable power of attorney designates one spouse to make financial decisions for the other spouse if he or she is incapable of managing his or her financial affairs. The durable power of attorney provides access to these agencies and companies if the spouse becomes incapacitated. The durable power of attorney can appoint successor agents if the spouse cannot act due to death, disability, or any other reason. Typically most married couples appoint one or more of their children as successor agents. This is not always the best strategy, especially if the children lack financial maturity. In those cases, a friend, coworker, CPA, financial planner, or other trusted individual can be designated to serve as successor agent. If no trusted individuals exist, a professional fiduciary can be appointed to serve in this role.
Planning for Incapacity
To plan for the possibility of incapacity, each spouse can designate one or more trusted individuals to make healthcare and other personal decisions for him or her. This is most often the spouse, but it can be any person the spouse trusts. The type of decisions the health care agent will make include where the spouse lives, what church the spouse attends, whether care will be provided at home or in an assisted living facility or nursing home, whether the spouse will be buried or cremated, and whether heroic efforts will be made if the spouse is on life support.
It is important that these documents are created prior to being diagnosed with a mental incapacity. Even though most individuals still retain capacity when first diagnosed with dementia or Alzheimer’s disease, any planning done after such diagnosis is subject to attack by an individual seeking control over finances and healthcare decisions. Claims of lack of capacity and undue influence are rampant in today’s environment. Planning early in life will diminish the possibility of someone attacking your estate plan.
Protecting Your Spouse and Descendants
After the death of the first spouse, a continuing trust is typically created to care for the surviving spouse. This type of trust often has provisions for distribution of income to the surviving spouse, distribution of principal if needed to maintain the surviving spouse’s lifestyle, and sometimes to allow for withdrawal of some or all of the trust assets by the surviving spouse. On the other end of the spectrum, the continuing trust may not provide for direct access to the remaining trust assets by the surviving spouse. This might be done to create asset protection for the remaining trust assets from creditors of the surviving spouse.
Where there are children from other relationships, the trust can be drafted to distribute assets to the children while at the same time assuring that the surviving spouse lives in comfort. Any assets that remain after the surviving spouse’s death, would also be distributed to the deceased spouse’s children. Sometimes there is concern that the surviving spouse may remarry or establish a relationship with a new partner and attempt to use the trust assets to benefit the new spouse or partner. If this is a concern, the continuing trust can be drafted to provide remarriage protections for the descendants of the deceased spouse.
Distribution at Death of the Surviving Spouse
Upon the surviving spouse’s death, the trustee will distribute the remaining trust assets among the designated beneficiaries. Most couples divide the assets among their living children and the descendants of any child that predeceased them. However, the couple can distribute the trust estate as they wish. They may wish to make gifts to friends and relatives. They may bypass the children and give the estate to grandchildren and great-grandchildren. Or they may donate some or all of their assets to charity upon the surviving spouse’s death.
As with the continuing trust for the spouse, the married couple may wish to provide divorce protection or creditor protection for their children and other descendants. This is accomplished through the use of trusts for the designated beneficiaries. A child or grandchild may suffer from a disability that causes the child or grandchild to need government assistance. Usually, in situations such as that, an inheritance paid directly to the disabled child will cause that child to lose his or her government assistance. In such circumstances, using a special needs trust is required.
Individuals who are considering drafting a trust or a will may wish to consult with an estate planning lawyer. He or she can explain the advantages of using a trust as well as a will. He or she can make recommendations based on the specific considerations of the client. He or she may even recommend using both documents, such as by using a pour-over will that places any property owned at the time of the testator’s death into the trust.