You are about to get married or have just been married. Would you like your fiancé or new spouse to be able to make decisions for you if you became mentally incapacitated as a result of an accident or injury?
You may think that once you are married, your spouse has some sort of legal authority to make decisions for you if you are unable. If that is the case, you would be mistaken. Marriage grants your spouse no such authority.
Your spouse can only make such decisions for you if he or she has been granted such authority by you, or by the court. You can grant such authority to your spouse through financial and health care powers of attorney. These documents would allow your spouse, or fiancé, to make financial, medical and mental health care decisions if you are unable.
Without a financial power of attorney, your spouse or fiancé would have to be appointed as your conservator by the court, before he or she could make you financial decisions when you are unable. Similarly, without a healthcare power of attorney, your spouse or fiancé would have to be appointed your guardian by the court, before he or she could make medical or mental health care decisions for you.
What about your property after you are gone? If you came into the marriage with your own property, how would you want it distributed upon your death? If you have no will in Michigan, upon the instant of your marriage, your spouse is entitled to the first $140,000 of your estate after your death in 2012 and the remainder would be split 50/50 between your spouse and your kids from a prior marriage.
With a will you can leave it all to your new spouse or all to the kids. However, if you left it all to the kids, your new spouse would still have a claim against your property equal to one-half the share he or she would have received had you died without a will.You could leave all your property to whomever you want if you and your spouse enter into a pre- or post-nuptial agreement in which your spouse waives all interest and rights in your property. If properly drafted, these agreements may also be effective in the unlikely event of a divorce.
You also could leave everything to your children in a trust. However, your surviving spouse would still have certain claims against those assets in the trust unless you had a pre- or post-nuptial agreement.
You also should do planning to protect your property. If you are a couple who is just starting out, you may be renting an apartment. When you rent an apartment, you should be aware that the contents of your apartment, your stuff, is not likely insured by your landlord. The landlord will typically only have fire/casualty and liability coverage on the building. Make sure that you get a renters insurance policy if you want to replace your stuff in the event of such a calamity.
When you are first married, you usually are not thinking about retirement. But this is one of the best times to think about your retirement. I have known a number of couples who have based their lifestyle on only one income, even though both worked. Instead of buying a house that you could just barely afford with two incomes, purchase a home you can afford on one income.
By using one income for living and the other for saving, you can have substantial savings upon retirement. And if you save amounts in a 401(k) or an IRA, your savings could grow either tax deferred or tax free. Your employer may even match a portion of your 401(k) contributions.
If you can not live on only one salary, at least put away something every month. If you put away $500 a month starting at age twenty and it earned 6% after tax, you would have nearly $1.4 million at age 65.
Another area for newlywed planning is in the event of an illness. Does one of you have health insurance? Can the other get covered on the policy? What are the costs? You don’t want a situation where you have an illness or accident and do not have coverage.
Investigate individual disability insurance policies to replace your income in the event of your incapacity. Also, look at life insurance to provide for your survivors after you are gone. You can lock in low rates on disability and life insurance when you are young and healthy. You may not be able to afford the same coverage when you are older or after an illness.
Just because you are newlyweds doesn’t mean that you don’t have to do any estate or retirement planning. A little planning early in your marriage can go a long way, save yourself a lot of money and minimize problems down the road.
By: Matthew M. Wallace, CPA, JD
Published edited February 19, 2012 in The Times Herald newspaper, Port Huron, Michigan as: Planning for future begins with ‘I do’s’