Successful Estate Planning is a Women’s Issue

Some people still assume that, when it comes to financial and legal matters, women are not key players. However, this is entirely inaccurate. Women are most likely to be highly involved and greatly affected by estate planning.

In recent generations, women have taken on a larger role in the financial arena. The number of women in the workplace has tripled in the last fifty years. Meanwhile, the real median income of women has increased by sixty-three percent, while that of men has declined by six percent in the same period. This income shift changes the family dynamics and gives women a greater voice in financial matters.

According to a recent survey, women have an equal say in major financial decisions in seventy-five percent of households. In homes where one partner is solely responsible for financial decisions, women outnumber men in that role by a four to three margin.

In fact, women own a majority of all publicly traded stock in the United States. Women control seventy percent of all wealth in the United States and inherit about seventy-five percent of all estates. This is the reason estate planning is even more important to women than to men: they are more likely to benefit from good planning or pay the price for poor planning (or no planning).

A study by the New England Journal of Medicine suggests that the odds of needing long-term care at some period in life is roughly fifty percent. More than forty percent will spend more than six months in long-term care. Guess who are likely to be the caretakers? Women. Women are three times more likely to cope with their mate’s illness or injury. Guess who are likely to be the survivors? Women. Widows outnumber widowers by a wide margin. It is essential for women to ensure that, at a minimum, they and their spouse have done basic estate planning. This includes four documents: General Durable Power of Attorney, Health Care Durable Power of Attorney, Will, and Revocable Trust.

When a husband is missing or becomes incapacitated what happens to his assets? How does a wife refinance the house to pay bills if her husband is unable or unavailable to sign necessary documents? Without planning, a wife must go to court and have her husband declared incompetent. This is an arduous process that is emotionally draining for all involved. However, this can be avoided with proper planning. A General Durable Power of Attorney allows the “Principal” to designate an “Agent” who will make financial decisions for him when he is unable to do so. With this document, a wife can sign for her husband in the event of his incapacity.

Similar problems arise regarding health care issues when a person becomes incapacitated. Who decides the appropriate treatment and the efficacy of procedures if the patient cannot? Like the General Durable Power of Attorney, a Health Care Durable Power of Attorney designates an “Agent” to make health care decisions for the principal if he is unable to make them for himself. As women typically cope with their mate’s illness, it is they who usually serve as the agent. Without this document, she may face difficulty in getting health care providers to follow her instructions.

Like incapacity, at death a person cannot express his or her wishes regarding various decisions. Who should inherit the family business? Who should care for minor children? A Will provides these answers and has several functions. First, and most importantly, the only manner to designate a guardian for minor children in most states is in a Will. Without a Will, you have no input in the decision, and the court will decide. Unfortunately, no matter how caring the judge may be, he or she does not know and love your children as you do. Second, the Will distributes any assets held in your name. Without a Will, the state decides who receives the assets, in accordance with a set list for “intestate succession.” Unfortunately, this set list provides the same distribution to your wonderful sister with seven children as to your brother who has not spoken with you in eight years. The Will can provide that the assets “pour over” into a Revocable Living Trust, to be distributed by its terms.

Even with a Will, any assets owned by you at your death must go through “probate” in order to be distributed to those designated by you. The process of transferring title from the person who died to the person who is designated to receive the property is “probate.” Probate can be expensive, time consuming, and emotionally draining for those left behind. A Revocable Living Trust is set up now, during your lifetime, and holds legal title to your assets. Because the trust owns the assets and the trust did not die, the assets do not need to go through probate. You still can use the assets, even though legal title is in the Trust. If you become incapacitated, the person you have chosen as your successor “Trustee” will manage the assets for you, much like the Agent under your General Durable Power of Attorney. The Trust can be very flexible and directs how and when the assets will be used. For example, the Trust can keep the children from squandering the assets, ensuring the assets are available for college or graduate school. Since the woman is likely to be the survivor and, therefore, the successor Trustee, it is essential that she take an active part in the planning process.

In addition to preparing basic documents, periodically review the beneficiary designations on 401k, IRA, or other qualified plan assets. Frequently, beneficiary designations do not reflect changes in circumstances. Qualified plan assets comprise an ever-increasing portion of the typical person’s assets, therefore this is a critical review step. Your periodic review also should include life insurance beneficiary designations.

There are many considerations which come into play when attempting to achieve your goals: children with special needs, aging parents, creditor protection, income taxes, divorce protection, estate taxes, etc. A qualified estate planning attorney who specializes in that practice area can help you structure your plan to achieve the best result. It is essential for you to be involved in the process from the start. The woman, as survivor, is likely to reap the rewards of security and harmony from smart planning.