Major life changes frequently usher in the need to modify an existing estate plan. Few such life changes are as traumatic or significant as the death of a spouse. Some needed modifications are obvious, such as updating beneficiary designations. But others might only be apparent to an experienced estate planning attorney. One example is the filing of a federal estate tax return to preserve the deceased spouse’s unused lifetime exclusion for use by the surviving spouse.

Crisis Can Create Opportunity

Estate planning is an ongoing process, as it accounts for changes in marriages, deaths, divorces, and births of children and grandchildren. Don’t assume your spouse left an adequate estate plan before passing away. Consulting with your attorney at such a time provides an opportunity to catch and correct omissions and mistakes. Doing so often also enables you to take advantage of new planning opportunities that did not previously exist.

For example, it’s not uncommon to discover assets you are unaware of, allowing for planning opportunities to transfer tax-free wealth. With the loss of a spouse’s income, uncovering assets may also help secure a widow or widower’s finances. You may also discover incomplete beneficiary designations, incorrect titling of assets, or an overlooked grandchild who is new to the family.

Rules and Deadlines Regarding Asset Transfers

Your estate planning attorney can also advise you of the decision-making deadlines inherent to your situation. There are some powerful wealth transfer tools available to you as a surviving spouse. For instance, you may opt to “disclaim” an interest in some of your late spouse’s assets to other beneficiaries. Note, however, that this must occur within nine months of your spouse’s date of death.

Tax Laws That Affect Your Inheritance

As a surviving spouse, you have the option to file a federal income tax return for that year as a single individual or as a married couple to receive higher deductions as long as you don’t remarry that year. Pennsylvania’s Inheritance tax also provides some planning opportunities. This tax can be minimized or eliminated altogether in some cases by post-death planning. So, for example, if a beneficiary other than a surviving spouse files a “disclaimer” within nine months after your spouse passes away, there will be no tax on the disclaimed assets if they default to you, or a lower tax if the assets default instead to another beneficiary at a lower inheritance tax bracket than the disclaiming beneficiary.

Aside from Wills, Review Related Legal Documents

Durable General Power of Attorney (POA).  A durable general power of attorney lets you name an individual to act on your behalf for financial matters. During your lifetime, this person is typically your spouse. As the surviving spouse, you will need to identify another trusted person to replace your spouse as power of attorney if no successor agent is named in that document. Or even if a successor is named, you may want to reconsider this choice or update your POA by filling the vacancy created in the position of successor agent.

Health Care Power of Attorney. The same considerations as above, regarding financial powers of attorney, also apply to your health care power of attorney, assuming you have one in the first place.  George Vasiliadis, an attorney with the law firm of Vasiliadis Pappas Associates, notes that “many of the clients we see don’t have a stand-alone health care power of attorney. Instead, they present us with a financial POA with some health-related provisions added in. That is not the best approach.”

Living Will. A “living will”, also referred to as a “statement of health care treatment instructions,” is a written statement you sign that provides guidance to your health care agent and your health care providers. It applies in situations where someone in an end-stage terminal illness can’t make or communicate their wishes for end-of-life medical treatment. Dionysios Pappas, an attorney with the law firm of Vasiliadis Pappas Associates, observes that “many of the living wills we come across fail to articulate the true wishes of the client; namely, to receive medical treatment that helps them get well, and not measures that simply prolong the dying process.”

Consult With Your Estate Planner

Reviewing and making appropriate changes to your estate plan with guidance from a competent estate & elder law attorney will protect you as a widow or widower. It’s a challenge to review this during an emotional time, but you need to prepare yourself for the future. Contact Vasiliadis Pappas Associates. We can help!