Make Sure Your Spouse Understands Your Estate Plan

You probably have taken great effort to ensure your spouse will be financially secure after your death. Yet a lack of understanding about how available assets will meet his or her future needs may cause your spouse to live either well below the affordable level of comfort or beyond his or her means. Make sure your spouse understands what resources will be available after your death and how your estate plan will be implemented. This can help ease your spouse’s peace of mind -- and yours, too.

Understanding the Estate Plan Before a Death

In many marriages, one spouse is more financially astute than the other and may handle the financial planning of both spouses. Having to quickly learn about those matters at such a difficult time can be a great burden on a surviving spouse. It is better for him or her to learn while you are alive.

Preparing your spouse to take an active financial role includes a review of the family’s assets, liabilities, income and expenses. Make clear what income will be available, especially if cash flow will be substantially reduced on your death. Make your spouse aware of which resources will replace income, such as retirement plan distributions, life insurance proceeds, and earnings on investments or annuities. Also, be sure your spouse understands what taxes, expenses and debts will be incurred on and after your death and which assets will be available to reduce or eliminate debt.

If your spouse is not interested in learning financial details, then arrange your estate plan with sufficient structure, such as a marital trust, to provide for his or her needs. Also select a trusted advisor or professional trustee to assist in managing your spouse’s affairs.

Also make sure your spouse has a basic understanding of what will happen to special assets, such as business interests, and the extent to which he or she will be involved with such interests. If your spouse isn’t, and doesn’t wish to become, actively involved in your business, then arrange your estate plan so that he or she is not burdened with the responsibility of managing it.

Changing Circumstances

Review your estate plan to make sure it still achieves your goals. A change of circumstances since the estate plan was established or changes in the law can affect your plan. A significant increase in net worth, the acquisition or sale of a business, the receipt of an inheritance, or even a minor change such as the purchase of fine jewelry may require some adjustments to your plan.

The gradual increase in the gift and estate tax applicable exclusion amount to $1 million in 2006 can affect smaller estates with slowly appreciating assets. In addition, you may need to consider the effect of the new qualified family-owned business interest deduction. When combined with the applicable exclusion amount, this deduction raises to $1.3 million the amount a spouse can pass on tax free.

No Surprises

Make certain your spouse understands how his or her financial needs will be met and who will provide assistance. This will not only increase his or her sense of security, but also give you both what estate planning is really all about -- peace of mind. To ease your spouse’s transition to life without you, analyze your spouse’s likely situation and take steps to avoid any unpleasant surprises.

Please call us if you would like a professional analysis of your spouse’s needs and the adequacy of your estate plan to meet them. We would be glad to review your situation and help your spouse understand how you have provided for his or her continued well-being.

Documentation

Assemble all relevant documents and information in one location so that your spouse has easy access to the necessary information, including:

• Wills, along with any codicils,
• Trust agreements and any trust amendments,
• Financial statements including retirement plan information, investment accounts, bank accounts   and CDs,
• Liabilities,
• Life insurance information,
• Information regarding the titling of assets, and
• The key to and location of any safe deposit boxes.