Estate planning plays a pivotal role in protecting couples and their families in New York, and marital planning is a nuanced aspect that requires careful consideration. This comprehensive guide explores strategies for pre-marital planning, planning for unmarried couples, and post-marital planning, highlighting the importance of thorough preparations in a jurisdiction like New York, which does not allow common law marriages to be formed within the state (though it will recognize one validly contracted in a state that permits it).
1. Pre-Marital Planning
Before saying "I do," couples like Monica and Joel can proactively engage in pre-marital estate planning to address potential financial issues down the road.
Example: Monica and Joel's Pre-Marital Estate Planning
- Prenuptial Agreement: Monica and Joel, both individuals with substantial assets, decide to create a prenuptial agreement. In this agreement they outline the division of assets and spousal support, and each may waive or limit the right of election against the other's estate (EPTL 5-1.1-A), which must be in writing, signed and acknowledged like a deed. A properly executed agreement makes each spouse's rights clear in advance.
- Designating Beneficiaries: Monica and Joel take the time to update their beneficiary designations on life insurance policies, retirement accounts, and other assets. By doing so, they make sure their intended beneficiaries are named in case of unforeseen events.
2. Planning for Unmarried Couples
Couples living together without marrying may take specific steps to ensure their wishes are honored.
Example: Monica and Joel as an Unmarried Couple Living Together
- Cohabitation Agreement: Understanding the complexities of New York's stance on common law marriage, Monica and Joel decide to create a cohabitation agreement. This legally binding contract clearly outlines how their assets and debts will be shared and distributed if their relationship ends or if one passes away, providing a framework for what each partner is entitled to.
- Estate Documents with Specific Provisions: Recognizing the need for specificity in their estate planning documents, Monica and Joel ensure that their wills, trusts, and other legal instruments explicitly address their unique situation. This includes clear statements regarding inheritance, property rights, and healthcare decision-making, ensuring their intentions are upheld.
- Designating Beneficiaries: Monica and Joel take the time to update their beneficiary designations to reflect their desire to leave assets to each other.
3. Post-Marital Planning
As couples evolve through various life stages, post-marital estate planning becomes essential for adapting the plan to new circumstances.
Example: Monica and Joel's Post-Marital Planning
- Updating Wills and Trusts: After the joyous arrival of their child, Monica and Joel revisit their wills and trusts. In doing so, they establish testamentary trusts to provide for their child's financial needs and designate guardians in the event both parents pass away. This forward-thinking approach safeguards their child's future.
- Reviewing Beneficiary Designations: Monica receives an unexpected inheritance, prompting the couple to review and update beneficiary designations across various financial accounts. This ensures that their assets align with their current financial situation, reflecting the couple's evolving circumstances.
- Purchase of real estate into a joint revocable trust. Monica and Joel decide to buy their first home together. Instead of holding title in their names, they create a joint revocable trust and place their new marital home into the trust. The deceased spouse's share of the property gets a step-up in cost basis on the death of the first spouse to die; the survivor's half does not, because New York is not a community property state. It also takes the property out of probate and, if drafted so the first spouse's share becomes irrevocable at that spouse's death, can help make sure that the house passes to their child even if the surviving spouse remarries and has children in the second marriage.
Planning Through Each Stage of Marriage
Marital planning in New York requires thoughtful consideration of legal nuances, particularly in a jurisdiction that does not allow common law marriages to be formed within its borders (while recognizing those validly contracted elsewhere). Couples like Monica and Joel can navigate these challenges through pre- and post-marital estate planning, and unmarried couples through cohabitation agreements and estate documents. By addressing potential issues proactively, they protect each other and their children and reduce the risk of litigation over the estate later.
