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Why Your Spouse Should Be at the Center of Your Estate Planning

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NEW YORK (MainStreet) – If you're wondering who's going to make sure your wishes are met after you die, your spouse is likely the first person you should consider.

As RBC Wealth Management points out, tens of trillions of dollars are expected to change hands in the United States over the next few decades as Baby Boomers transfer their wealth to the next generation. Surviving spouses are going to play a huge role in how that wealth is distributed.

“No one likes to think about death, much less build a plan around what will happen when they are gone," says Ward Ring, director of the Wealth Consulting Group at RBC Wealth Management. “But by taking some time to develop a well-thought-out estate plan, you can ensure that the nest egg you've built over the course of a lifetime passes on to your children and grandchildren as you had envisioned.”

According to the Center on Wealth and Philanthropy at Boston College, an estimated $59 trillion — divided among heirs, charities, estate taxes and estate closing costs — will be transferred from 93.6 million American estates between 2007 and 2061. That's a lot of responsibility for spouses to take on, but John Diehl, senior vice president of strategic markets at Hartford Funds, says spouses willing to bear that responsibility offer the best hope for those with a specific set of wishes for their estate plan.

“Remember that proper planning is more than just the numbers, it is also very emotional,” he says. “Who better to understand what you would have wanted to do with the wealth that you both took a lifetime to build than your spouse?”

It isn't just a matter of money, either. A spouse can handle power of attorney and your health care directives to make sure you have someone acting on your behalf with regard to financial matters and medical decisions should you become unable to make those decisions for yourself. They can oversee your family inventory and keep track of the location of financial documents, names and contact information for accountants, attorneys, financial advisors, assets and property and pension information.

“The person you choose to make financial and health care decisions on your behalf if you become incapacitated and are unable to do so for yourself should be someone that knows your wishes and intentions well — the same applies in terms of carrying out your wishes after you've passed away,” says Shomari Hearn, certified financial planner and vice president at Palisades Hudson Financial Group in Fort Lauderdale, Fla. “Your spouse is typically the best person to assume the role of attorney-in-fact and/or trustee. He or she is with you every day, knows you better than anyone else and, in most cases, you both share the same goals.”

For this reason, advisors suggest introducing your spouse to your wealth, legal, tax and other advisors to make sure everybody's in the loop. They also advise regularly reviewing and adjusting your estate plan with your spouse, to appoint him or her as the executor to your estate and to communicate with them about your plans as often as possible.

“I always think it's best to have as much information exchanged among the spouses and to educate the spouses on their options and the process,” says Richard Baum, tax partner at Anchin, Block & Anchin in New York City. “Typically the provisions for the children are going to be parallel in the husband's planning and in the wife's planning, and since no one knows who's going to die first, it's important that there's coordination between the two.”

If spouses are going to set up a trust to distribute assets after one dies, for example, Baum suggests naming the surviving spouse as at least a co-trustee to make sure the deceased spouse's intentions are fulfilled. Michael Wall, president and founder of Retire Well in Altoona, Pa., and Palm Beach, Fla., notes that this approach may have the added benefit of smoothing over friction among children or other heirs who don't see eye to eye. But Baum and Hearn note that if the surviving spouse has been given discretionary distributions from that trust or is in a second marriage and has children from a first marriage who are beneficiaries of the trust, it might be a good idea to appoint an independent trustee. 

“In this case, having a non-family member, such as a close friend or an adviser serve as trustee should minimize, at least not add to, any potential conflict between your surviving spouse and your children after you are gone,” Hearn says.
 
Wall also notes that certain scenarios beyond a surviving spouse's control may preclude him or her from serving as an executor or trustee. If that surviving spouse has been incapacitated, it might be best to seek an independent option.

“If at all possible, having spouses central to estate planning is necessary,” Wall says. “I say 'if at all possible' because if they are at a place or an age where they are mentally not coherent and the decisions they're making are not rational, they should not be involved Also, if they're overly emotional about the loss of a loved one that they can't make a clear decision or a thought, it might be best if for a season they're not involved.”

But if a spouse is feeling up to the task, Wall says it's imperative that they feel included in estate planning decisions and that their participation be mandated in writing. If they'd rather not, that's fine, but not extending the option can make them feel unwanted or superfluous after decades of working as a team. Also, at the very least, putting a spouse at the center of estate planning decisions could help them continue the work they began with their now-deceased partner and give them control of the second part of the journey they and their spouse began together.

“Sometimes the remaining spouse wants to be involved in the process but feels a little sheepish about being involved because they weren't the decision-makers during the deceased spouse's life,” Wall says. “Help them feel that they can add and bring value, and that gives them renewed purpose in their life.”

— Written by Jason Notte in Portland, Ore., for MainStreet

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