Estate Planning Considerations for Couples
When planning their estate, married or unmarried couples have options in creating wills, with opportunities to maximize benefits, depending on each couples' circumstances. The information provided here covers basic estate planning considerations and types of wills that do not also involve living trusts. It does not address the need for other important documents that comprise a comprehensive estate plan, such as durable powers of attorney and health care directives. The information contained herein is for educational purposes and should not be construed as legal advice. The Air Force Academy Foundation does not dispense specific legal advice or services – please consult a trusted estate attorney to further explore the creation of your will(s), as states' laws may vary, particularly if you reside in a Community Property state.
Estate Planning in General
When you pass away, the way your assets are distributed to your heirs depends upon how you own the property, what type of property it is and any beneficiary designations. Property that passes automatically (i.e., by beneficiary designation for a future direct distribution of a portion or all of what's left in various accounts you currently hold) is called non-probate property. It does not have to pass through a probate court process to determine the "new" owners.
Many married couples own most of their assets jointly with the right of survivorship. When one spouse passes away, the surviving spouse automatically receives complete ownership of the joint tenancy property, without the necessity of probate proceedings. This distribution cannot be changed by will, which may lead to the erroneous belief that this precludes the need for you to have a will. Because the surviving spouse becomes the outright owner of the property, he or she will need a will to direct its disposition at his or her subsequent death. Since one never knows which spouse will survive the other, it is important that both persons have a will.
A will is a legal document that allows an individual (legally known as a testator) the ability to designate the assets that do not pass by beneficiary designation, The terms of your will determines how assets, which can consist of both real and personal property, are distributed to your heirs. A properly executed will allows you to choose those individuals or organizations who shall receive your assets at your passing. Unless special circumstances arise, i.e., the will is contested, the probate court will enforce your wishes as to the distribution of your property. Please remember, most states prohibit the disinheritance of a spouse. By statute, your spouse has a right of election and may demand a percentage of your estate, no matter what the will declares.
An important consideration in will preparation is naming the person or entity who will be responsible to help settle your estate. Selecting your personal representative, trustee or executor (terms vary by state) should be carefully determined, so your wishes are fulfilled in an efficient and fair manner per the terms of your will. Whether you choose an individual (often a spouse) or "corporate" executor, such as a bank's trust department, law, investment or accounting firm, you want to have confidence they are competent, trustworthy and capable to serve. It is always advisable to name a successor trustee who can step in if the primary trustee is unable to serve, particularly in the case of an individual personal representative.
Beneficiaries of Wills
No matter what type of will you have (as explained below) the persons and/or entities (such as a charity) you name in your will are beneficiaries. The specifically named beneficiaries can receive a fixed amount (pecuniary bequest) or a percentage of your estate's assets upon your passing. These bequests need to go through probate, but the distributions will go to them directly rather than being part of your general estate and subject to a percentage division among your other beneficiaries.
There are two types of beneficiaries: primary and contingent. Primary beneficiaries are those persons and or entities you designate to receive your estate's assets. A contingent beneficiary is a person or entity that you designate to receive your estate upon your death and when the primary beneficiary has passed away before you. You may designate multiple primary or contingent beneficiaries of your estate. This would involve designating the percentage of the assets to go to each co-beneficiary.
Choosing the Proper Type of Will
Couples should carefully determine the type of will to create (or modify existing will(s)) that best achieves their desires and meets the circumstances of their estate. The considerations include asset types, the number of and locations of real property, business ownership interests, specific asset disposition desires, and the guardianship of any minor children or adults in your care. Your estate attorney can provide advice to help you chart the best course of action, perhaps suggest trust options, and ensure you have the proper ancillary documents. Following are examples of will types.
Mirror (also known as reciprocal) Wills
Mirror wills are virtually identical wills based on the idea that married or unmarried couples will likely have the same wishes regarding their estate. No matter which person passes away first, the estates are handled the same way. The basic structure of mirror wills is similar to an individual last will. It bequeaths assets and property to certain people, then leaves everything else to a spouse or partner and the spouses or partners agree on who is to receive their property when the survivor of them passes away.
For younger couples with minor children, while they often agree on a guardian to raise their children should both spouses die, you are not required to agree and could pick different guardians in your mirror wills. When considering a possible guardian, you might also want to assess whether or not your designated guardian would also be able to manage the child's finances. A person who makes a good guardian to raise your children might not necessarily be good with money. In this case, you may opt to name a trustee to manage finances for the children.
Typically, spouses name one another as executor of each other's wills. But you should also name another person or corporate trustee as a successor in each will. Also worth noting is a mirror will leaves all of your estate to the surviving spouse, after specific distributions to named beneficiaries. If the surviving spouse later remarries and creates a new reciprocal will with their new spouse, children of the first marriage or named beneficiaries may lose their inheritance.
Mutual (also known as joint) Wills
A variant of mirror (reciprocal) wills is a mutual, or joint, will. In this type of will the spouses or partners agree that the surviving spouse/partner will not change his or her will after the death of the first person. While on the surface a joint will may seem appropriate, today most family law and estate planning law attorneys advise against using mutual wills. Some of the reasons: spouses rarely die at the same time (which leads to settlement complications); a joint will is locked after the first spouse/partner passes away, not allowing for will modifications if the survivor's circumstances change; couples with blended households may have different needs; and the survivor may have privacy issues because of the probate process involved with the first-to-pass spouse.
Individual Wills
With the many different kinds of relationships today and the complexity of these relationships, mirror, reciprocal or mutual wills may not be the best solution. Couples who may marry later in life might bring with them assets and family relationships that they will want to protect. There may be blended families with different beneficiaries. For these kinds of complex relationships, you should look into creating separate individual wills that address all the unique circumstances of your lives.
Charitable Bequests
Any of the will types described above may include provisions for charitable bequests, after your loved ones and heirs receive their inheritances. The Air Force Academy Foundation is grateful for donors who choose to arrange a future legacy gift. You can designate a specific asset, or, more commonly, a percentage of your estate's value. Furthermore, you may specify the Academy program to benefit from your generosity, either in the will itself, or through a separate document between you and the AFA Foundation. Or, your bequest may be unrestricted, with its use determined at the time the Foundation receives the bequest. Sample wording and other specifics can be obtained from the AFA Foundation Office of Gift Planning.