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Why You and Your Spouse Should Have Separate Wills

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Why You and Your Spouse Should Have Separate Wills

As loving husbands and wives, it’s natural to assume our spouses are the automatic beneficiaries of our estates upon death. However, failing to plan separately with wills and trusts can end up hurting the ones we aim to provide for.

In this article, we’ll explore why married couples need their own customized estate plans through separate wills, trusts, and other legal documents.

Understanding Default Intestacy Laws Leaves Gaps in Your Plan

If you and your spouse don’t have wills, your state’s intestacy laws will determine how your assets are distributed after death. While intestacy aims to provide a basic framework, it doesn’t account for your unique family circumstances and wishes.

Some gaps that intestacy leaves include:

Lack of Guardian Designation: Without a will, the courts—not you—will decide who raises your minor children if both parents pass away. Your top choice for guardians may not be the one appointed.

Inheritance Issues: State laws provide a specific share of your estate for your spouse, typically 50%. However, any remaining assets usually pass to your parents before your children. This contradicts how many families want assets distributed.

Potential Stepchildren Disinheritances: If you have children from a previous relationship, they are not legally considered heirs under intestacy and could be left with nothing. A will allows you to include and provide for all family members.

No Control Over Assets: If your spouse remarries after your death, a subsequent spouse may gain control over assets you want passed down to your own children. A bypass trust in your will preserves more control.

Having separate documents allows you to create customized estate plans addressing issues like these that default laws fail to handle for your unique situation. No family is a “one size fits all.”

Avoiding Probate Hassles with Separate Planning

Dying without a plan means your estate undergoes a lengthy probate process supervised by the court. This delays distribution to your beneficiaries for months or years, and 3-5% of your total estate typically goes to probate fees and administrative costs.

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By having separate wills, your spouses can avoid probate on many of your assets through:

Transfer on Death Deeds: Name your beneficiaries directly on real estate deeds so property passes outside probate.

Joint Tenancy with Rights of Survivorship: List each other as joint owners of accounts and titles, so assets automatically bypass probate at the first death.

Payable on Death Accounts: Assign beneficiaries for bank and investment accounts so funds pass directly.

Transferring Assets Into a Living Trust: Name your spouse as trustee to manage assets for your beneficiaries while avoiding the lengthy probate system altogether.

Setting up these types of non-probate transfers lets married couples leverage each others’ exemptions and pass along more wealth free of red tape and delays. Coordinated estate planning maximizes these opportunities.

Avoiding Unnecessary Estate Taxes

With proper coordination, married couples can combine their federal estate and gift tax exclusions to pass along double the assets free of tax. However, without separate plans, this benefit is lost.

In 2022, each individual has a $12.06 million lifetime estate and gift tax exclusion. Married couples have a combined exclusion of $24.12 million if one spouse utilizes the unused portion of the deceased spouse’s exclusion through the estate tax marital deduction.

To take advantage of this, the surviving spouse’s will or trust must have the flexibility to receive and administer these “portability” assets from the first spouse. With separate plans, language can be included to optimize efficiency and minimize taxation.

Joint or poorly coordinated plans potentially leave hundreds of thousands or even millions in unnecessary estate taxes. Meeting with advisors allows couples to align their wishes, draft coordinated plans, and maximize protection of family wealth.

Privacy and Financial Independence

Another reason for separate estate documents is privacy and financial independence between spouses. Not all couples have a desire to share every asset detail or retain full access to each other’s money at all times.

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Having separate bank accounts, investment accounts, trusts, and wills provides personal barriers that still complement an overall coordinated estate plan. This protects assets if legal issues like lawsuits or potential divorces arise down the line.

It also allows each spouse to leave assets in their separate estate plans for children from previous relationships or favored charities separately, instead of requiring mutual agreement. This independence prevents personal disputes from disrupting your carefully laid out wishes for beneficiaries.

Accommodating Future Life Changes

All spouses hope for lifelong love, but around 50% of marriages in America end in divorce. Separate estate plans give couples flexibility to change arrangements if partnership status changes later in life.

By contrast, joint plans mean asset distribution is intertwined, so divorce requires reworking the entire setup. Separate documents let each spouse modify their own plans independently without coordination hassles.

Changes like second marriages or having more children are also easier accommodated under individualized documents. Removing a spouse as a beneficiary or appointing new heirs becomes simpler than unraveling provisions in a joint estate arrangement.

Adequate planning can even tailor documents to provide ongoing support for an ex-spouse in the event of a divorce judgment. This offers superior control over lifetime and after-death wealth transfers than relying solely on the other partner’s private estate.

Coordinating Plans with Advisors

While having separate plans is important, equal coordination between them remains key in estate planning for spouses. Experienced attorneys, trust officers, CPAs, and other specialists help coordinate documents to work together as a complete system during both lifetimes and after the first death.

Advisors ensure names, titles, and language complement each other across the separate wills and trusts. They maximize opportunities like spousal portability, qualify gifts for tax exemptions, and insert provisions allowing trusts to work seamlessly together.

Proper coordination also helps the surviving spouse comprehend how funds transfer from the deceased partner’s estate into their own post-death management as outlined in their living trust. This provides comfort knowing all arrangements align with the bigger picture goals.

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With professional help, separate documents offer maximum privacy, flexibility, and comply with general best practices for spousal estate plans. At the same time, addressing technical details ensures they function smoothly as a synchronized team.

The Risks of Going It Alone

There exist some risks if couples try to coordinate their own estate planning without expert involvement:

  • Contradictory or confusing asset distribution between the wills
  • Details incompatible with other financial accounts
  • Tax language creates unexpected consequences
  • Problems accommodating future relationship changes
  • Unclear roles for successor trustees
  • Improper accounting that loses potential exemptions
  • Overlooking state-specific nuances

As with any complex legal matter, going without guidance risks unintended blindspots and loopholes that disrupt your goals. Independent plans require even more precision navigating naming rights, tax impacts, roles of successor fiduciaries, and continuity between documents.

Attorneys, CPAs and advisors catch issues to create a bulletproof, coordinated estate system. While not cheap, their fees easily outweigh potential costs of errors. For this reason, attorneys typically recommend separate representation for each spouse during the planning process.

Planning Together, Separately

In summary, no two spouses have identical circumstances requiring estate plans. Having separate legal documents allows unique customized arrangements to distribute assets precisely as you intend upon death or incapacitation.

Simultaneously, careful coordination between attorneys helps spousal wills and trusts function together like a well-tuned machine. This “planning together, separately” approach provides privacy, independence and control while maximizing opportunities for beneficiaries via tax exemptions and non-probate transfers.

The benefits of separate estate planning extend beyond smart financial strategies. By laying out your wishes in detail with advisors, you gain comfort knowing your family’s future will unfold according to your unique vision after you’re gone. For most couples, separate yet harmonious plans ensure “till death do us part” really means just that.

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