Will your retirement plan leave your spouse broke?
Have you established a plan to ensure your spouse will continue to have sufficient retirement income? Many seniors fear the loss of income when one spouse dies. This is especially true with second marriages amongst seniors. If the accounts are not in a joint name, they may be left to the other spouse’s children in a second marriage, leaving you with little or no resources. Making sure all assets including vehicles are registered in joint names assures that asset will be transferred to you with no probate and does not pass through the will. By having assets invested separately, this might actually place a financial hardship on your surviving spouse?
When your spouse dies, assets registered in the joint names do not trigger taxation, rather a simple re-registration of the asset. But if assets are invested in individual names, the asset is considered sold on the date of death and taxes must be paid, possibly leaving your spouse with fewer funds in retirement and paying unnecessary taxation. Capital gains can reduce the value of the asset and reduce your spouse’s income for their lifetime. If the asset is registered in one person’s name, make sure you check if there is any tax payable to re-register the asset.
Your will probably states that the transfer of the assets to your surviving spouse. But if there is a second marriage or large capital gains on the assets, this may simply not happen in the manner you think. It’s not that simple when assets pass through the will. Plus any fees, charges, executors fees, costly delays, and taxes can be avoided by registering assets in a joint name with a spouse. There can be similar challenges in a common-law relationship as well as a second marriage.
The best thing you can do right now is to review how your assets are owned, who is named as your beneficiary, and the language of your estate planning documents. Then check with your legal advisor and a financial institution or financial advisor who is knowledgeable in estate planning to help guide you and your spouse.