If you don't have children, you may think it is not that important to engage in estate planning. In fact, it may be more important. There are hidden concerns for couples without children.
In many scenarios, your assets may pass to an individual or individuals you would never want to receive them. A typical example of a married or unmarried couple without children goes like this:
Lee and Chris have no children and want to leave what they own to each other. In their wills, they each decide to give a small portion of their assets to their own family members but they don't want assets to go to their partner's relatives. In this case, their wills mirror each other somewhat.
But what happens if one partner dies soon after the other?
Let's say Lee had $500,000 and left $400,000 to Chris and $100,000 to other members of Lee's family. Chris dies soon after. In that case, the $400,000 would go to the heirs of Chris, not Lee. That is not exactly what Lee was planning on.
This arrangement may be worth the risk if Lee has a small estate because Chris would end up spending the money. But let's say Lee's estate totaled $20 million. Chris is unlikely to spend it all before dying, so without proper planning whatever is left would go to the family of Chris.
Generally, you cannot control who gets the money after your heir dies. In other words, if Lee leaves money to Chris in a will, Lee cannot control how Chris spends it after Lee dies. This is where a trust comes in handy. You can either set up a trust while you are living or create a trust after you die according to terms in your will. In this case:
Lee can put assets in a trust for Chris — either all of the assets or Lee can leave some assets outright to Chris in a will. If some assets are left outright, Chris can use those assets as pleased without the restrictions that generally come with a trust. By setting up a trust, Lee will prevent some of the assets from going to unintended individuals. Under the terms of the trust, when Chris dies, the assets will go to an individual or entity that Lee names as the "remainderman."
Lee might think this is unnecessary because Lee could just tell Chris to bequeath the remaining assets to Lee's family.
However, verbal instructions aren't legally binding. After Lee dies, circumstances may change. Chris may remarry or one of Chris's relatives may really need the money. There is also a chance Chris could lose contact with Lee's family members (or maybe Chris never liked them). Bottom line: Chris may not fulfill Lee's wishes.
Another issue that childless couples need to consider is who will make financial and health care decisions for them if they become incapacitated. People with adult children typically appoint them in power of attorney and health care documents to make decisions on their behalf if they are unable to do so. But people without children often find it difficult to appoint someone they trust.
Again, let's look at the case of Lee and Chris.
Lee and Chris have power of attorney and health care directive documents that spell out that they each want the other to make financial and health care decisions for the other in the event that either becomes incapacitated. Lee becomes ill and Chris makes all the relevant decisions involving Lee's finances and health care, including sensitive end-of-life decisions. After Lee dies, Chris suffers a stroke. Without documents in place that name a successor, Chris has no one to make important decisions. Family members (siblings, nieces, nephews, etc.) may turn to a court to decide.
In the case of a married or unmarried couple without children, it's important to have an estate plan and certain documents in place. Your attorney can help you set up your estate plan in a way that allows you to control who makes decisions and receives your assets.
Get in touch today and find out how we can help you meet your objectives.
