You undoubtedly know the importance of estate planning. You also likely know that planning becomes even more important when you marry and have children, because you now have people you want to provide for and protect in the event something happens to you. If you recently married you may be wondering, “Should my spouse and I do our inheritance planning together?” While no two situations are exactly the same, there are a number of reasons why it is a good idea for most married couples to do their inheritance planning together.
Comprehensive Estate Planning
Inheritance planning, or estate planning, may start with a Last Will and Testament. However, a comprehensive estate plan will include much more than just a basic Will and will accomplish much more than simply deciding who will receive your estate assets when you die. Many of the components that go into a comprehensive estate plan could conflict with one another if you and your spouse create separate estate plans. By working together on your plans you can avoid conflict and maximize the benefits of each individual plan.
Retirement planning should be part of any comprehensive estate plan because without proper retirement planning there may not be any assets left for your loved ones to inherit when you are gone. Assuming you and your spouse remain together throughout your golden years your plans should be in sync to ensure that you have enough assets available to live comfortably while still ensuring that sufficient assets remain to pass down to children, grandchildren, and other loved ones.
Incapacity planning is an estate planning component that should definitely be done in conjunction with your spouse’s plan. The purpose of incapacity planning is to ensure that if you suffer from a period of incapacity you will know who is in control of your assets and who will be making decisions on your behalf. If, like most couples, you want your spouse to be the one to step in and take control, and your spouse would want you to take control for him/her, it is best to create your plans at the same time to ensure that they work in conjunction with one another. For example, a common incapacity planning tool is a revocable living trust that works by allowing you to appoint yourself as the Trustee and transferring major assets into the trust. You then appoint a successor Trustee who will take over in the event of your incapacity. Clearly, you don’t both want to create a revocable living trust using the same assets. By coordinating your plans you can accomplish your incapacity planning goals without confusion or duplication.
Gift and Estate Taxes
One of the biggest concerns for anyone with a moderate to large estate is exposure to federal (and sometimes state) gift and estate taxes. The key to avoiding the tax is to transfer as much wealth as possible tax-free prior to your death. Again, coordination is imperative. For instance, a married couple can use the “gift splitting” option available for the annual exclusion to make gifts valued at up to $28,000 to an unlimited number of beneficiaries tax-free. Moreover, those gifts do not count toward the lifetime exemption limit.
If you are part of a blended family, meaning you and/or your spouse have children from a previous relationship, the need to do your inheritance planning together takes on a heightened importance.
For more information, please join us for one of our upcoming seminars or contact the experienced Illinois estate planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.