financial steps to take when your spouse has cancer

What Updates Should You Make to Your Estate Plan After Your Spouse Dies?

Kay Dee Cole

August 24, 2021

You should review and/or update your estate plan whenever any significant changes happen in your life. As you reassess your finances and build a budget for your next chapter of life, it’s important to look at your estate plan and figure out what needs to change and what doesn’t.

How Soon Should You Update Your Estate Plan After Your Spouse Passes Away?

A lot of financial planners say you shouldn’t make any big decisions for at least a year after your spouse passes, and we agree—to a certain extent. Some decisions just can’t wait, but this isn’t one of them.

Click here to download “The Next Chapter: A Financial Guide After Losing Your Spouse”

This is one of those things that doesn’t necessarily need to be done right away, but you should try to get to it within the first year after your spouse passes.  There are some items such as tax deadlines to be aware of.

One way to make sure it gets done is to schedule an appointment with your estate planning attorney far in advance. Pick a date several months away so you have time to process your grief while still keeping yourself accountable to handle this important matter.

Related: Who Should be on Your Financial Team (Besides an Estate Planning Attorney)?

How to Reassess Your Estate Plan After the Death of Your Spouse

There are multiple places in your estate plan that will likely need to be updated after your spouse passes, beginning with your beneficiaries.

Update Beneficiaries

Your spouse’s name is probably mentioned multiple times in your estate plan—whether it’s in your will or elsewhere.

Update anywhere that your spouse was named as a beneficiary. Even if your will has a built-in backup plan stating who your assets should go to if your spouse has passed away, now is the time to go in and remove their name from your will and make sure everything is as neat and updated as it needs to be.

The last thing you want to leave your loved ones with is the potential of confusion and red tape getting in the way when executing your estate.

In addition to updating your will, other areas you may need to update include:

Power of Attorney

To be clear, we’re talking about your power of attorney here. If you gave your spouse power of attorney, it needs to be updated to someone else. 

Related: Not All Powers of Attorney Are Created Equal

Other options for power of attorney include your children, a sibling or a close friend. Consult your estate planning attorney when making a decision.

Your attorney may caution you against naming children, depending on your relationship with them. If you think there could be problems, you may want to name at least two of them as joint powers of attorney so they have to work together rather than having one make all the decisions alone. Not only can this minimize problems, it can help reduce the burden a single child may feel.

Your siblings may or may not be the best choice depending on the status of their health and how old they are. For instance, if you name your older brother, chances are he could end up passing away before you.

The thing to keep in mind when choosing a power of attorney is who you can trust to follow your wishes—even if they disagree with them—and who can you change it to so you won’t have to change it again if they pass away.

Healthcare Power of Attorney

The same goes for healthcare power of attorney—often more so. Your healthcare power of attorney is the one who will make medical decisions for you in the event that you are unable to do so. 

If you suspect that one of your children or a sibling might not execute your wishes, then look elsewhere. How you want to be treated in such an event should be entirely up to you.

HIPAA Authorization

This one often falls under the healthcare power of attorney. A HIPAA (Health Insurance Portability and Accountability Act) Authorization form is a way to let someone else share/release your private medical information to be viewed by others. If you have such a form, chances are your spouse is on it, so it’s important to update.

Schedule of Assets

A schedule of assets is a list of your assets required by courts when executing your estate. After the passing of your spouse, you will likely need to update the listing for life insurance and any others that directly refer to your spouse. In addition, if you sell any real estate, vehicles or other items, you will want to update the schedule on those as well.

Digital Assets

Digital estate planning is a relative newcomer to the world of estate planning, but it is becoming more and more important every day.

Digital assets may include:

  1. Social media accounts
  2. Email accounts
  3. Benefits programs (frequent flyer, card perks, etc.)
  4. Cell phone apps
  5. Online bank accounts
  6. Online subscriptions
  7. Chatroom accounts
  8. Cryptocurrency
  9. Non-fungible tokens (a.k.a., NFTs)
  10. Any other information stored on a computer or “in the cloud”

Some of these assets may have more financial value than others. For instance, if you don’t have the login to your spouse’s Facebook page, you can still request that their page be either deleted or turned into a memorial page by submitting a few documents.

On the other hand, if your spouse happens to own any Dogecoin or other cryptocurrency and you don’t know the password, you are pretty much out of luck—just ask the guy with $225 million sitting in bitcoin that he can’t access because he doesn’t remember the password.

If you can still plan ahead, keep a central repository of all logins for you and your spouse so neither one of you is left scrambling to close accounts and cancel subscriptions. Consider keeping everything in a password manager like LastPass or 1Password.

Bills, Credit Cards, etc.

Most likely, you have both your name and your spouse’s on all your bills and credit cards. This is something you can wait to do, but it’s important to make sure you remove your spouse’s name off your bills after he/she passes. 

If your spouse is listed as primary contact, it may be hard for you to get the account changed if you move. It’s always good to get the paper copies of bills paid and make sure you are the main contact.

Your estate is your legacy, so it is important that you keep it up to date with all the latest information. Contact your estate planning attorney today to schedule your appointment, whether you’re planning to meet with them tomorrow or next year. 

Need help making sense of your financial situation after the passing of your spouse? Click here to download our ebook: “The Next Chapter: A Financial Guide After Losing Your Spouse”

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Just Found Out You’re the Beneficiary of a Trust? Here’s What You Need to Know

Just Found Out You’re the Beneficiary of a Trust? Here’s What You Need to Know

If you have been named as a beneficiary of a trust, you probably have many questions about what comes next. Trusts can take many forms and may be governed by unique provisions established by the creator of the trust or “grantor.” As a trust beneficiary, you have certain rights. But to ensure that your financial and other interests are fully protected, you need some basic information about different trust structures and their management.

Trust Basics

At their most basic, trusts can be grouped into two broad categories – living trusts and testamentary trusts. A living trust is created by an individual during his or her lifetime. The grantor transfers property to a trust that is managed for the trust beneficiaries by a trustee. The grantor may act as trustee, or he or she may appoint another family member or family advisor, such as an attorney or accountant to be the trustee. A testamentary trust is established by will upon the death of the person whose assets it represents. Testamentary trusts can be used for many purposes; chief among them to provide for current and future beneficiaries.

In either case, it is the trustee who is charged with administering the trust in strict accordance with its terms. If this so-called fiduciary duty of the trustee is breached in some way, beneficiaries have the right to protect their interests by taking legal action against the trustee.

Role of the Trustee

Following is a brief overview of the trustee’s role and responsibilities.

• Asset collection and protection – Two of the trustee’s key responsibilities are collecting assets earmarked for the trust and ensuring the protection of those assets. For instance, if real estate is included as a trust asset, the trustee is responsible for the maintenance and upkeep of the property and maintaining appropriate insurance on the property. In the case of financial assets, such as cash or securities, the trustee must maintain one or more separate accounts on behalf of trust beneficiaries.

• Investment oversight – The trustee ensures there is a plan in place to address the needs and interests of current and future beneficiaries. Typically, trust investments are expected to generate income for beneficiaries while also retaining and reinvesting principal. In some cases, the trustee may have the authority to make distributions of principal to beneficiaries.

• Taxes – The trustee reports all income generated by trust assets and pays tax on any undistributed income as well as capital gains realized by the trust. In addition, the trustee informs beneficiaries of the amounts that they must report on their personal income tax returns as a result of trust distributions.

• Recordkeeping – The trustee is responsible for documenting every transaction that takes place in the trust accounts. Prior to final settlement, the trustee must demonstrate to the beneficiaries that all assets and income have been properly administered and distributed.

Beneficiary Right to Action

In addition to regular accounting of trust assets, beneficiaries have a right to request a special accounting from the trustee if there is reason to suspect a problem with the trustee’s performance of his or her fiduciary role. If it is found that the trustee is in violation of his or her responsibilities or fails to provide proper documentation of trust activity, then the beneficiary has the right to take legal action, including removing the trustee and requesting a replacement. Such action is normally handled by filing a petition with the local probate court.

Revocable vs. Irrevocable Trusts

Living trusts may be revocable or irrevocable. As its name implies, property held in a revocable trust may be “revoked” at any time; the terms of the trust may be changed and assets returned to the grantor. He or she can establish detailed instructions as to the handling of trust assets during his or her life and ensure continuity of management upon incapacity or death. Revocable trusts need not be filed in probate court after death, thus maintaining family privacy. However, the grantor will be subject to income and estate tax as if the property were owned outright.

In contrast, assets placed in an irrevocable trust are permanently removed from the grantor’s estate, and any income and/or capital gains taxes owed on assets in the trust are paid by the trust. Upon the grantor’s death, the assets in the trust are not considered part of his or her estate and are therefore not subject to estate taxes.

Irrevocable Trusts Offer Lifetime Giving to Beneficiaries

While requiring some loss of grantor control, a properly drafted irrevocable living trust allows individuals of substantial wealth to begin transferring assets to beneficiaries during their lifetime without incurring gift or estate tax. (Please note that a three-year survival period may be required in certan situations).

For example, the normal annual limit on tax-free gifts is $14,000 per beneficiary in 2015, an amount that may be indexed for inflation in future years. Under some circumstances, a taxpayer may include amounts above that in his or her unified estate and gift tax exclusion amount ($5.43 milliion in 2015 for an individual, twice that for a married couple, and subject to indexing for inflation in subsequent years). In addition, upon the grantor’s death, appreciation on the remaining trust assets is not subject to estate tax (assuming any three-year survival requirements are met).

Being named as a beneficiary of a trust is indeed a welcome event, but not without its complications and, if handled improperly, unfortunate consequences. For help understanding your rights and protecting your inheritance, it may be wise to engage the services of an experienced trust attorney.

Financial Planning Association
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