Wedding Bells Mean Other Changes Too
It is summer time and wedding bells are ringing!
That's how I started a couple of weeks ago as I wrote about the tax considerations and changes that needed to be addressed by couples getting married.
After completing that article, I realized that there are many other financial issues beyond taxes for which newly marrieds need to discuss and plan. So, as a follow up to that column (see The Sun-Times July 12th Edition) here are some things for you to consider.
By no means is it an exhaustive list or explanation, but rather a launching point for discussions between you, your spouse and a professional advisor who will walk this path with you.
First of all, I recommend you sit down and assess what assets (and their value) that you each bring to the marriage, as well as the amount of any debts. Make a list with a column for each spouse. If there are already jointly owned assets/debts, you may need a column for that too.
Depending on several factors, including family issues, net worth, whether there are children from before the marriage or even debt problems, you will need to consider whether to continue to own those assets individually, transfer them to joint title or maybe some other arrangement. This is where the advisor starts to become valuable.
As part of considering how to title assets, it may be advisable to establish what is known as a living revocable trust (LRT). I intend to write more about a LRT at a later time, but for now assets owned by an LRT avoid costly and sometimes lengthy probate procedures should you unexpectedly die.
LRT assets are also much more easily managed for your benefit (or that of your spouse and/or children) if something occurs where you are unable to do that for yourself.
Another consideration in the transfer of assets is beneficiary designations. Do you have life insurance, annuities, IRA's or other retirement plans?
If so, you need to review and possibly update your beneficiaries. Way too often we see this not happen, and those assets transfer to someone to whom you may not now want them to go.
LRT or not, at a minimum you need to have wills prepared, or amended for the change in your life circumstance, as the case may be.
Many people do not think a will is needed in the early part of their marriage, especially if they are young, have never been married before, or have what they consider to be low net worth.
However, whether you know it or not, you have a will! Yours just may happen to not be in writing, but rather is what state law says it is for those that pass without a written one.
Is what the state says what you really want to happen? Most people find it is NOT, and need a written will to make sure their wishes are fulfilled.
A properly drafted will is also where YOU select (not the courts) who will handle your final affairs, who will take care of any minor children you have or could have in the future and other matters.
And while you are in the process of having these documents planned and drafted, go ahead and execute Power of Attorneys, giving someone legal authority to act on your behalf if you are unable to do so, and Health Care Directives, also known as Living Wills, where you get to say what kind of care you want administered or withheld in certain situations where again you cannot communicate that at the time.
Changing course some, at the beginning of your marriage (and periodically later) you need to assess your need for both life and disability insurance. These needs will change over time, but almost everyone needs the protection of both.
Life insurance protects loved ones in the event of death by replacing lost income, covering final expenses, mortgage obligations and other debts, providing for future education needs, etc.
Disability insurance can be especially important and is often overlooked. Most people don't know that below certain ages, your chances of becoming disabled are greater than dying. This insurance is vital to replace lost income if you are unable to work.
One final thought on a practical level; make sure you send address change notifications to those who need them, such as financial institutions, insurance agents, credit card issuers, even your CPA. You definitely want them to be able to find you.
As you can see these are all very personal and important things that you want settled way in advance of there actually being a need! The time is now to get started.
