Plans Will Vary
Your estate-plan focus will vary depending on your situation. Are you married or single? Children or no children?
For a single woman without children, “The hardest decision you’re probably going to make is who is going to be taking care of you,” Annino said, in the event an illness incapacitates you. That is, who will make your medical and financial decisions?
For married women with children, often the first two estate-planning concerns are naming a guardian for the kids, and planning for income replacement through life insurance, Annino said.
For women who are widowed, key considerations include making sure their estate plan has been revised to reflect the husband’s death and to assess whether there are different financial-planning opportunities and challenges to consider, Annino said.
A first step for anyone who’s gone through a divorce is to check the beneficiary designations on retirement and other financial accounts. “A lot of people walk away from their spouse but then never do any of the cleanup stuff they should do,” Annino said.
Women who remarry or those who come to a marriage with significant assets should think carefully about their estate plan before tying the knot. “We find that women are hesitant to discuss their net worth going into a new relationship, but that puts them in grave danger,” said John O. McManus, founder of McManus & Associates in New York and New Providence, N.J.
“If they keep the assets on their own balance sheet, the good news is, if they divorce, the new spouse won’t have access to that money,” McManus said. While state laws vary, in some cases the assets one brings to a marriage “are not an asset in divorce.”
The bad news, assuming your wishes are otherwise, is that, if you die first, your husband will get one-third of those assets. “By operation of law, your spouse is entitled to a minimum of one third of your assets. Social policy in the U.S. says you cannot disinherit your spouse,” McManus said. Even if you write a will in which nothing is left to the surviving spouse, “by law, he’s entitled to one third of the assets,” McManus said.
There are a couple of ways to forestall that issue, though none are ideal, he said. One tactic is to make sure beneficiary designations on retirement plans and the like are set such that your children or other heirs inherit — but those designations need to be in place before you get married. If they are, such designations “will control and overrule the right of election,” McManus said. But changing beneficiary designations after you get married may be difficult, because some financial-services firms won’t allow changes that entail disinheriting a spouse without the spouse’s consent.
Another solution is to set up a trust, naming a child or other relative as the recipient, and put assets into it before you get married. You can still borrow from the trust, McManus said, but the husband will not have access to that money if you die.
McManus said he’s seen situations where a spouse changed the beneficiary designation on a retirement account to name her husband, rather than a child, with a verbal agreement that the money would go to the child in the event of the husband’s death. But at that point, there’s no way to be sure that will happen when you’re gone. “Be clear in your head what you want to leave to your children and to your spouse before you get married,” McManus said.
Women who remarry also should realize that any assets they brought to the marriage are on tap to pay for the new spouse’s medical bills — that includes nursing-home care, which can quickly drain one’s resources, Annino said.
“It doesn’t matter whether you’ve been married two days or 50 years, the spouse has to pay for medical care,” she said, and a prenuptial agreement can’t prevent that. “Your assets are going to be on the line for his medical care, and you can’t get around that.”
Women who bring a hefty amount of money to a marriage should consider protecting her assets by purchasing a long-term-care policy for her husband, Annino said.