As a married couple, you will probably want to plan your estate together. While you can plan together, you should also consider how your assets are owned (jointly or individually), since it’s usually difficult to predict who will pass away first.
If one spouse typically handles most or all of the family’s financial affairs, and the other spouse is less financially involved, it’s wise to put plans in place to ensure the latter would have the help needed to continue on a good path financially.
As always, ensure your beneficiaries are up to date on the assets that have provisions for naming them, including investment and bank accounts with transfer on death (TOD) designations.
You may have assets that are held with joint ownership with rights of survivorship such as real estate, annuities, and bank accounts. For these types of assets, the ownership will pass to the surviving spouse directly upon the death of the first, often avoiding probate.
If, for example, your spouse is not currently a joint owner of the home you own, but you want your spouse to inherit the home fully without it going through probate, updating the ownership may be a simple, inexpensive way to accomplish this.
Trusts with distinct benefits for spouses
Credit shelter trusts allow assets to be available for the surviving spouse’s needs, typically once he or she spends down his or her own assets. The deceased can have in place the ultimate beneficiaries to receive the assets upon the death of the surviving spouse and these assets typically pass free of additional estate taxes.
Qualified domestic trusts (QDOTs) enable transfers at death to non-citizen spouses to qualify for the unlimited marital deduction available to U.S.-citizen spouses.
Qualified terminable interest property trusts (QTIPs) may be established to provide lifetime income to a spouse and then have the remainder transferred to another beneficiary after the spouse’s death.
A trust can be an effective tool for transferring assets to a spouse while reducing estate taxes and maintaining control over the assets even after you have passed away. A simple revocable trust or irrevocable trust may suit your needs, or you may want to consider one of the three trusts with distinct benefits for spouses, listed at the right.
Depending on the size of your account balance, designating your spouse as beneficiary may have advantages and disadvantages. To learn about the options your spouse will have when inheriting an IRA, see If you are the surviving spouse of an IRA owner in Fidelity Viewpoints®.
The rules for 401(k)s and other qualified retirement plans may be different from those for IRAs, including special provisions for spouses. For example, if you are married and you want to designate beneficiaries other than your spouse, you may need written consent from your spouse.
Otherwise, retirement plans follow roughly the same guidelines for what is taxable, but other features will vary from plan to plan. Contact the plan’s administrator for specific rules governing your plan.
Spouses from previous marriages
If you have had a previous marriage, you’ll want to make sure all of your ownership documents and beneficiaries are up to date. You will also have to comply with any divorce settlement arrangements.