Child-free Couples: A Five-Step Guide to Estate Planning
It’s easy to assume that being a child-free couple means planning for your estate is a smooth sailing process. Yet you will be surprised to find that unique challenges await you. The number of child-free couples is on the rise, and many couples are consciously deciding to skip the parenting step in their lives. It’s a perfectly reasonable decision to make especially if a couple seriously considers issues like financial stability, career ambitions, the time required to devote to children, and whether they would enjoy being parents or not.
So, how does this affect the estate planning process if you are a couple who have settled on the child-free life? From the outset, the most important thing is to ensure you have set forth your wishes concerning the distribution of your assets. Choosing not to be parents does not mean the state should partition your estate as it pleases after you are gone. However, rather than placing emphasis on leaving an inheritance for your offspring, you will have to appoint other beneficiaries.
It all depends on your circumstances, relationships, and affinities with your close relatives, loved ones, friends, and even the church you attend. To simplify the process, here are five steps to planning your estate the right and child-free way.
Step 1: Get a Will
If you do not have kids then naturally you are not mandated by any law to allocate part of your wealth to nonexistent heirs. Disposition of assets to a spouse can still be enforced in the event that one of you survives the other. Still, there are plenty of cases where spouses both die in the same space of time. This is why having a will is very important. While you may want your spouse to inherit all your assets, you need to make a provision that covers for both of your deaths.
You and your spouse don’t want to be turning in your graves in horror as a probate court distributes your assets to the wrong people. It is common knowledge that long-lost relatives who never bothered to visit you while you were alive can suddenly turn up to claim the fruits of your hard work. Having a will means those around you get exactly what you think should come to them. It also means you can still show your appreciation to your supportive sister, friendly colleague, and kind pastor by giving them part of your assets when you are no longer around to enjoy them.
Step 2: Reinforce your wishes with a Power of Attorney
With a PoA, you appoint a person and authorize that person to make important financial decisions for you and your spouse should you both be unable to act in such a capacity. It is a legally recognized document which gives voice to your wishes through the actions of another. It goes without saying that any person you appoint should be someone you wholeheartedly trust to handle your wealth responsibly and according to your express instructions. The person can be tasked with bill payments, distribution of real estate, and any other financial investments. If you decide to obtain a PoA, then you should know there are three main options available.
A general PoA is immediately valid the moment the ink begins to dry on your signature. It can be revoked at any time but loses effectiveness once you become incapacitated.
A springing PoA depends on a specific named event to become effective. You and your spouse can both decide what will activate this document with common examples including incapacitation and during your absence while on vacation.
A durable PoA, as the name indicates, has a longer lifespan. It goes into effect once you sign it and remains legally binding even after your incapacitation.
Step 3: Review your beneficiaries on a constant basis
Why is this necessary? In situations where you have life insurance policies and retirement assets, this portion of your wealth can only be distributed via beneficiary designations. Your Will will not be considered. If your beneficiary designations are not updated, this will endanger the efficacy of your estate plan.
Thus, naming the right beneficiaries ensures your assets are received by those who are on the same page as you are. Your beneficiaries also get tax advantages while avoiding probate.
Step 4: Find the correct way to be charitable
When you don’t have the welfare of offspring to worry about, you may still want to plant a few seeds that benefit other people as part of your legacy. Do you have a cause you believe in, and that has perhaps brought some value to your existence? Common charity organizations that are favored by most people include churches, orphanages, cancer societies, and learning institutions.
Your wealth can be distributed to any charity of your choice via trusts which are many and varied. For example, a charitable lead trust can authorize a charity to access income from the trust while you are still alive, but the charity will no longer be able to do so once you die as the remainder of the trust goes to your beneficiaries.
In contrast, a charitable remainder trust allows you to access money from the trust while you are still alive, but once you are incapacitated the rest of the trust goes to the charity. Other charitable trusts include Pooled Income Funds and Flip Charitable Remainder Unitrust. It’s important to opt for a charitable trust that suits your tax situations, and your desires which is why seeking advice from an estate planning attorney is crucial during this step.
Step 5: Your pets can be beneficiaries too!
For some child-free couples having pets is a responsibility they take seriously. If you are distressed by the possibility of your animal friend ending up in a substandard animal shelter when you are no longer around, then you can make provisions for them in your estate plan. This ensures they remain comfortable and well taken care of after you are gone.
The easiest way is to appoint a person who is willing and capable of taking over ownership of your pets. You can also create a pet trust fund that will cater specifically to the care of your pets. Another option is to appoint an animal care organization to take over the trust, using the funds to provide care for your pets. In any case, it is important to find out the method of operation behind each available option.
With these five steps, you can craft the perfect estate plan for you and your spouse, which leaves you with more peace of mind to enjoy the benefit from your assets. It’s important to know that your wishes regarding your estate are just as valid as the wishes of those who have opted to be parents. The joys of parenthood are not meant for us all, and you can always live vicariously every time you watch your friend’s baby smile dimples at you. If you haven’t already, go forth as a child-free couple and forge your estate plan!