Not long ago, wives were “silent partners” when it came to estate planning. Husbands were the ones in charge of long-term planning and major financial decisions. In fact, estate planning attorneys often advised wealthy men to leave their assets in trust for their wives, so that a trustee other than their wife could manage and preserve the family fortune. It was assumed that a widow would not have the skill or the experience necessary to responsibly manage the money she inherited from her husband.
The role women play in a family’s financial affairs has changed dramatically since those times. There are three times as many women in the workforce as there were 50 years ago, and the average woman’s earning power has increased dramatically. This means that women have taken on a more active role in managing their families’ finances and in making important long-term planning decisions.
At the same time, women tend to live longer than men do, and the average woman still earns less over the course of her lifetime than the average man. This means that the estate planning stakes are higher for women. Still, too many women remain silent when it comes to estate planning for themselves and their families. Here are five things every woman needs to know about the importance of estate planning.
1. If you have young children, you need a Will. It is hard for a mother to imagine not being there for her children as they grow up. But here’s an even scarier prospect: having no input into who raises your children in the event of your death.
The only way to communicate your wishes concerning guardianship of your children is with a Will. If you die without a Will that designates a guardian for your kids, a judge will make this monumental decision without any input from you. Without your guidance, the guardian your children end up with may or may not be the person you would have chosen.
2. A Financial Power of Attorney can keep you and your family out of court. Another essential estate planning tool for women is a Durable Financial Power of Attorney. You use this document to designate someone you trust to manage your finances in case you become disabled. You need a power of attorney and, if you’re married, so does your husband. If you become disabled without this important document, your family members could find themselves spending time and money filing a petition in Probate court simply to be able to pay the bills, refinance the house, or access your financial accounts. This is especially important if the wife generates the primary income in the home.
3. A Durable Power of Attorney for Healthcare. This estate planning tool is similar to a Financial Power of Attorney, except that it lets you designate an agent to make medical decisions for you if you’re unable to make these decisions for yourself. The medical power of attorney gives the agent the authority to make medical decisions for the disabled person. But, you also need a HIPAA Authorization which designates who can have access to your protected confidential medical information. You need both of these, and so does your husband. Without these documents, doctors might be unwilling – or unable- even to talk to a spouse about a patient’s medical condition or treatment options if the patient is critically ill or otherwise disabled.
4. A Revocable Living Trust can help you avoid probate. Probate is the court-supervised process for distributing a person’s assets after he or she dies. This process is necessary if you die leaving behind property solely in your name. Many people believe that having a Will allows you to avoid probate, but this is not true. A will simply replaces the state’s default of “intestacy” with your preferred recipients.
The Revocable Living Trust is a popular estate planning tool for avoiding probate. You set up the trust while you’re alive, and it holds title to your assets, allowing you to retain control over your property during your lifetime. When you die, the trust still exists and still holds title to your assets. Because the trust does not die, there’s no need for probate. Instead, a trustee you’ve appointed follows your instructions for distributing the assets held by the trust. The trust can continue after your death. It can provide distribution to your husband and children while protecting your children and assets from any remarriage by your husband.
5. You Should Keep an Eye on Your Beneficiary Designations. If you have retirement accounts or life insurance policies that allow you to designate a beneficiary, it’s important to periodically review your beneficiary designations. The beneficiary designations determine who inherits these assets, even if your Will says otherwise. Your estate planning attorney can help you make sure your beneficiary designations work with the rest of your estate plan to meet your goals for your loved ones.
When it comes to estate planning, women have a variety of concerns to juggle: children with special needs, aging parents, estate and income taxes, and protection from creditors and divorce are just a few issues you may need to face. It is important that both spouses are involved in the estate planning process from the beginning.
By: The American Academy of Estate Planning Attorneys