Responsibility to yourself and your spouse requires a plan for life’s circumstances. Planning that protects you both from life’s misfortunes will be one of the most important things you can do for each other. Because this planning is based on law and, in general, is specific to your state, you should seek guidance and advice of attorneys, financial planning professionals and tax accountants. What should you consider as you plan to protect your future spouse?
Wills: A will is a legal document that states among other things, who receives your assets when you die. This document can address a wide range of valuables you want to pass to others. A will can also state your desires regarding who will raise your children and who will take care of your financial affairs, such as paying debts and taxes. Without a will, the state will decide according to that state’s laws for you and your loved ones. If you already have a will, update it and make changes when necessary. Financial planning professionals recommend you use an attorney with estate planning knowledge and experience to prepare a will for your specific needs. Legal expenses for estate planning vary. Remember to review and update your will and estate plan periodically, especially if your family circumstances change because of births, deaths or divorce.
Revocable living trust: As part of your estate plan, you may want to create a revocable living trust, that specifies who controls your assets while you are alive (and in the event you are incapacitated) and directs what happens to your assets when you die. While you are alive, you can transfer property over to your trust for your (or your family’s) benefit and use. You also specify in the trust how you want your property distributed when you die. At any time, however, you can also change your mind about who your beneficiary shall be. When you die, the trust becomes irrevocable and passes your property directly to the individuals you have designated without probate. Trusts are somewhat complex so you should consult an attorney to establish one. Costs vary depending on your location and the complexity of your finances. If you use a revocable living trust, you will still need a will as backup to designate who receives sentimental items and personal effects which may typically not be covered in a trust. You will also want a will to designate a guardian if you have minor children.
Durable power of attorney for financial matters: This document authorizes someone you designate (your agent) to transact business on your behalf in case you are incapacitated. Depending on the scope of your power of attorney document, your agent can perform duties that include writing checks from your bank account, paying bills and acting on your behalf regarding certain legal documents. Request that your attorney draft a new durable power of attorney for you to execute every 3–5 years, to show that your intention still holds. Insurance companies and financial institutions are not as likely to honor an old power of attorney as one executed within the past 3–5-year period. Some experts advise, as an additional precaution, that you take your durable power of attorney to your financial institutions and ask them to confirm they would have no problems accepting it.
Durable power of attorney for health care and physicians directive: A durable power of attorney for health care and physicians directive conveys your wishes about medical treatments and options in case you are unable to make decisions for yourself. Essentially, the document authorizes your agent to determine the kind of care — or lack of care — you receive. Talk with your loved ones about how you want to be treated and designate a person you trust to make potentially difficult health care decisions for you. Forms to establish a durable power of attorney for health care vary from state to state and can generally be obtained from a local hospital or health service organization. An attorney can also help you complete the necessary paperwork or will prepare these documents for you, generally at a relatively minimal cost.
Health insurance: Without health insurance, just one trip to the emergency room could put serious financial strain on your family or deplete your savings. Health insurance is one of the most important ways you can protect yourself and your family, not only because of the significant debts you could incur without it, but also because you are less likely to seek preventive care or timely diagnosis of an illness without it. If your employer offers subsidized group health insurance coverage as one of its benefits, taking that coverage is usually a better choice financially than buying a private medical insurance policy. You may also be eligible for group health insurance coverage through some other membership organization, such as a professional society or a union. If private health insurance is your only choice, you will need to include it in your budget.
You have several decisions to make about the kind of coverage to purchase. Most policies currently offered are managed care plans, such as an HMO (health maintenance organization), a PPO (preferred provider organization) or POS (point-of-service plan). Decide which policy is best for you based on how much you are willing to pay in premiums and deductibles, whether or not physicians you want to use are available to you under the plan, what special health care needs you have, and what kinds of services you may require.
Disability insurance: If a severe injury or illness prevents you from working, disability insurance can help you keep sufficient income coming into the household. Even if both you and your spouse are employed, the insurance could be important for each of you. Dual career couples are likely to rely on both incomes to run their household without interruption. The policy replaces a portion of your income after certain requirements are met. You may be able to get some disability coverage through your benefits plan at work that will cover as much as 60–70 percent of your income. Premiums vary depending on the type of plan you choose.
Life insurance: When you are single and have no dependents, life insurance may not be a necessity, unless you have significant debt. When you marry and someone depends on you and your income, life insurance begins to make sense. Life insurance is designed to cover debts and replace the income lost to your beneficiaries when you die. Talk to a financial planning professional about how much you need to protect the future of your loved ones. You will want to consider what kind of life insurance (e.g., term or permanent insurance), is best for you. Compare policies among insurers. Consider cost, policy benefits, the insurer’s reputation and the insurer’s rating from independent agencies, such as A.M. Best, Standard & Poor’s and Moody’s.
Long-term care insurance: You will want to consider the possibility that some day one or both of you may need long-term care services such as home health care, rehabilitation or nursing home care. A long-term care insurance policy can help safeguard your savings from the high cost of long-term care services. If you are in your 20s or 30s, you should regard long-term care insurance as a future expenditure. As you move into your 40s and 50s, purchasing the coverage may be a consideration. Research the options that long-term care insurance offers and review specific policies available to find the one best suited to your needs.
Property and casualty insurance (Homeowners, Renters, Auto): Once you are married, you will want to protect those personal possessions you have accumulated. Insurance can protect you against unexpected losses.
To get the best value for your insurance dollar, it is important to: