You may have heard it’s important to have an estate plan, but you may not know exactly why. An estate plan is essentially a group of legal documents that express your wishes for how you would like your assets to be distributed after you pass away and who could help manage your affairs if you became incapacitated. For married couples, both younger and older, estate planning is essential to preserve the value of your estate and control how your assets are given to loved ones.
Whether you’re a newly married couple or have been married for years and need assistance with creating an estate plan, don’t hesitate in contacting our experienced Massachusetts estate planning attorney today. Our knowledgeable legal team at The Heritage Law Center is well-prepared to handle all of your estate planning needs.
Benefits of Estate Planning for Married Couples
Wills, trusts, powers of attorney, and health care directives are some of the documents often found in estate plans to help express an individual’s wishes. However, not only does an estate plan help determine how your assets are distributed after your death, but there are other benefits to establishing one. These benefits include:
- Ensure your family is taken care of financially
- Specify who you want as guardians of your children and pets
- Decrease legal fees and taxes
- Make sure your finances are managed well if you become incapacitated
- Choose someone to make medical choices for you when you can’t
- Select preferences for personal medical treatment
- Reduce stress surrounding funeral planning
- Explain decisions in your absence
- Minimize wait times for your assets to be distributed to your loved ones
- Help your loved ones avoid having to navigate through a legal mess during an emotional time
The Massachusetts Estate Tax Marital Deduction
Massachusetts has an estate tax marital deduction, which means that when one spouse passes away no estate taxes are due. While great in theory, this may not eliminate estate taxes but rather delay them until the surviving spouse dies. It’s important to note that this deduction only holds for surviving spouses who are U.S. citizens.
There’s a specific amount of money/assets (an exemption) that someone may have before they must pay estate taxes. Under federal law, if one spouse doesn’t use their exemption, then the other spouse can use it. However, this portability rule isn’t allowed in Massachusetts.
In Massachusetts when the first spouse dies, the marital deduction permits the surviving spouse to avoid paying estate taxes. But if all of the assets go to the surviving spouse’s estate, it doesn’t change the fact that the estate will be taxed if over the exemption amount ($1,000,000).
However, married couples can create a trust to limit their Massachusetts estate taxes. One such trust, an AB trust, can save Massachusetts couples a significant amount of money. An AB trust minimizes estate taxes by splitting into two (a survivor portion and a bypass portion) upon the death of the first spouse, splitting the taxable estate into two smaller estates. The surviving spouse can access property or draw income from it, assuming the terms of the trust is set up to allow it, but is not taxed on the deceased spouse’s portion.
Some other strategies for minimizing estate taxes include creating a:
- Tax-free annual gift
- Charitable trust
- Life insurance trust
- Qualified personal residence trust
What should married couples consider when estate planning?
Although married couples should have their separate estate plans, partners should still be involved in establishing answers to the following questions.
1. Who will you choose as your executor or trustee?
You’ll choose an executor for a will and/or a trustee for a trust. This person will be responsible for managing your estate. Ideally, your executor or trustee should be trustworthy, dependable, have good organizational and financial skills, and have good common sense.
It’s not unusual to name your spouse as the executor or trustee, but there are certainly other options. You may determine that one of your adult children is a good choice or prefer to have a family friend in charge. In some cases, you may even place an attorney in the role. No matter who you choose, you’ll want to also list an alternate in case there is some reason your first choice is unable to take care of the duties required.
2. Who will you select as the guardian(s) of your minor children and pets?
When a married couple has minor children, parents should agree upon and choose a guardian and a back-up guardian for them, in case the parents pass away. If they don’t name a specific guardian in their wills, the court will make its own decision.
When one parent passes away, the surviving parent will maintain custody. However, if both parents pass away at once, the guardian named in the Last Will and Testament will raise the child.
It’s important to consider who would be the best fit all-around to take on the responsibility of raising your children. Then be sure to ask them if they would be okay with doing so. You can always include a letter with your will explaining any feelings, thoughts, or requests that you would like to share with your child’s selected guardian.
You can also include your pets in your estate plan by naming a caretaker for them in your absence and by leaving some money for the cost of their care.
3. Do you want to leave gifts to specific people?
Estate assets include everything you own, such as:
- Real estate
- Joint bank accounts
- Stocks and bonds
- Business assets
It’s important to determine if any assets will be left to someone other than your spouse if you were to pass, and how marital assets would be distributed if you both passed away at once.
4. Do you want jointly owned property to avoid probate after death?
There are three types of ownership in Massachusetts: tenancy in common, joint tenancy, and tenancy by the entirety. When one spouse dies, jointly owned assets are transferred to the surviving spouse without going through probate. (a court proceeding that ensures the will is valid and the property gets distributed the way the creator wanted). A tenancy by the entirety also has a right of survivorship, but this form of joint ownership is only permitted for married couples. When spouses own property as tenants in common, they can own different percentages or shares, and the property won’t automatically pass through a right of survivorship.
By planning to avoid probate, you can:
- Reduce costs
- Directly transfer assets
- Simplify estate distribution
Free Estate Planning Reports
You can find more information about estate planning in our free reports: Estate Planning Essentials Report, Massachusetts Estate Planning: Saving on Taxes Report and 7 Common Mistakes Parents Make When Selecting Guardians Report.
Contact Our Massachusetts Estate Planning Attorney Today
We develop estate plans for married couples on a regular basis. We have the knowledge and expertise to create a plan that meets your unique needs and protects you, your assets, and your children. Contact our Massachusetts estate planning attorney today for a free initial consultation. By working with us, we’ll see to it that you’re well-prepared for the future.