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Now
that you are getting married, you must also plan for the marriage of your
assets. Planning for the marriage, or non-marriage, of your assets requires some
planning both before and after the wedding. Consider this situation -- If Romeo
and Juliet had been living in Ohio and been married at the time of their
tragedy, since Romeo passed away first, Juliet’s parent’s would have
inherited both Romeo and Juliet’s entire estate. No part of the assets would
revert to Romeo’s family, unless Juliet’s parents make a gift to them. This
seems unfair, but is a true example of what can happen when you fail to plan.
concerting to think about serious issues such as estate planning but wise
planning will help ensure prosperity and peace of mind for yourself and those
you love most.
Before the wedding, consider whether a pre-nuptial agreement is appropriate.
A pre-nuptial agreement is a contract between you and your fiancé where you
agree on the division of assets in the event of a divorce or death, as well as
what rights or obligations that you may have or give up in your partner’s
estate. In Ohio, the pre-nuptial agreement is only enforceable if it is signed
prior to the wedding. Pre-nuptial agreements are very common when either or both
of you have accumulated significant assets or debts on your own, or when there
are children from a prior marriage.
There is an old saying that young people fail to plan because they feel
death, disability or divorce is not something that will happen to them and older
people fail to plan because they feel as if they are placing the nails in their
own coffin. Neither is usually true.
There are at least five different estate planning tools that any couple
should consider:
1. LAST WILL AND TESTAMENT
Even if a husband and wife have their assets
in joint and survivorship ("payable upon death") form, provisions
should be established to direct the distribution of assets after the death of
the surviving spouse. A Last Will and Testament is used to:
Identify your beneficiaries and the division of your estate;
State your choice of a guardian for minor children; and
Designate your choice of an executor (someone to carry out the terms of
your will).
2. NONPROBATE ASSETS
The title to your assets does not
automatically transfer to your spouse upon death. Assets pass to your
beneficiaries only through the Probate process, or by "contract."
Nonprobate Assets are assets that pass to your spouse, children
or others by contract. That is, during your lifetime, you have entered into
contracts with your bank, broker, or insurance company to deliver specific
assets to a designated beneficiary automatically upon your death. Although these
nonprobate designations are an easy and inexpensive way to avoid probate, there
are potential problems with joint ownership - i.e. loss of control or access by
the joint owner's creditors.
3. A LIVING TRUST
is a contract that governs the use, management and ultimate distribution of
either a single asset, a few different assets, or all of your assets. This is
different from the joint and survivorship or payable on death designation which
can govern stocks, bonds, mutual funds, or accounts. A living trust is often
used to avoid probate; but more importantly, it can be used to control assets
after your death. Examples include:
Preventing children from receiving large sums of money at an early age;
Protecting the inheritance of a spendthrift spouse or children;
Preserving the inheritance of your children in the event of a second
marriage by the surviving spouse; or
Ensuring funds being available for an aged parent or an incompetent
relative.
For large estates (typically over $625,000), there are many different types
of trust distribution provisions that are used to reduce or avoid estate and
income taxes.
4. A DURABLE POWERS OF
ATTORNEY is a document that allows
someone else to act on your behalf if you are not able to act yourself. Simply
being married does not give you the authority to make financial decisions on
behalf of your spouse.
There are basically two types of a Power of Attorney.
Financial Powers of Attorney allows someone to make financial decisions
on your behalf and place them into effect. This might include such things as
selling assets or signing income tax returns.
Health Care Powers of Attorney
allows someone to make health care
decisions on your behalf.
Obviously, a power of attorney should be given only to someone you ABSOLUTELY
TRUST.
5. A LIVING WILL DECLARATION
declaration is a direction to your doctor
or other health care providers describing what your wishes are for your health
care treatment if you become unable to communicate with the doctor directly, are
permanently unconscious or are terminally ill and death is otherwise imminent.
This usually involves whether or not to connect you to life support systems, or
if you are already connected, whether or not to remove the life support system.
At the happiest time of your life, it can
be disconcerting to think about serious issues such as estate planning but wise
planning will help ensure prosperity and peace of mind for yourself and those
you love most.
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