Myth Busting: No Planning Needed – My Spouse Will Get Everything

If you’re married, you likely own some property or bank accounts jointly with your spouse. When one spouse dies, the surviving spouse automatically becomes the sole owner. In most cases, this structure is utilized to provide a convenient and easy way for the survivor to have continued access to funds. Easy access? Yes. Protection? No!

This is a common estate planning myth that needs to be busted. The joint ownership approach can be dangerous. While it is convenient for joint assets to pass automatically to the surviving spouse, this outright transfer offers no protection. What happens if, after your spouse dies, you need long-term care at home or in a facility? Or what if you get into a car accident and are sued? And what about the potential tax impact when you later try to sell certain assets? Since the property that was owned jointly is now yours alone, it is therefore available to satisfy any resulting judgment, creditor, nursing home, or tax liability.

Additionally, what if, after you die, your spouse gets remarried? If the brokerage account you owned jointly becomes your spouse’s only, your spouse is now able to spend it all in any way he or she wants without any consideration for your wishes or the next generation. Even worse, what if your spouse gets remarried and then later divorced? This new spouse could end up with a portion of the joint assets that you intended to pass onto your children. With blended families being common today, this is a real concern for many people.

This is not to suggest that estate planning should be done to disinherit your spouse. Rather, it means the two of you must sit down and plan out what happens to your joint property and accounts upon either of your deaths, ensuring that 1) the survivor is provided for, and that 2) any remaining money and property is transferred to your beneficiaries in a way that is agreeable to both of you.

To see if your estate plan needs attention, check out our interactive diagnostic tool, which can help gauge the readiness of your plan.

Read more myth busting posts about estate planning and trusts here.