An Estate Planning Guide for Women

In today's competitive economy, both a husband and wife frequently have serious careers. Increasingly, women are entering high-status, high-salary positions. It is becoming increasingly common for the wife, not the husband, to be the primary wage earner in a marriage.

For the ever-rising numbers of women who are working hard and making money, planning for family and future is more complicated than ever before. Since half of all marriages end in divorce, and those that do not end in divorce end in the death of one or both partners, women are under even more pressure to build a financial identity that can not only withstand the demands of a tough economy, but can also endure the division of a marriage.

Understanding your state's divorce laws

In a community property state, like California, earnings during marriage will be considered half the wife's and half her husband's. Any gifts or inheritance she receives in her name alone will be considered her separate property, unless she mingles them with community property or takes title to them jointly with her husband. If a woman is concerned about her property rights after divorce, she should be sure to keep her separate property from mingling with her husband's property as much as possible.

In a separate property state, like New York, earnings separate property, which simplifies things a bit, especially if the wife happens to be the higher wage earner.

In reality, it is difficult to have a marriage in which each party keeps his or her property completely separate. Generally, the assets will mingle and pre-nuptial agreements and/or the laws of the applicable state will dictate the distribution of assets upon divorce.

Distribution of assets by will or trust

In the event that a marriage is terminated by the death of one of the parties, rather than by a divorce, the distribution of assets is generally dictated by writing a will or testamentary trust. A testamentary trust is an instrument that operates like a will, distributing property upon death in the form of a trust. A testamentary trust is generally written into the text of a will. Testamentary trusts are good ways to provide for minor-aged children and others who may not be ready to responsibly handle a large sum alone.

Without writing a will, upon the death of the property owner, the property will be distributed according to the relevant state's intestacy laws. Although most states intestacy schemes give the deceased's property to his spouse before any other party, occasionally complications may arise.

The only reliable method to insure who will receive what property is an estate plan which can be developed through a living trust, will or testamentary trust. It is important to note that if the parties divorce, the will needs to be redrafted to provide for the former spouse despite the divorce. In most states, divorce revokes a gift in a will, so after the divorce judgment the will must be rewritten to acknowledge the split and grant the gift despite the divorce.

One of the best ways to control the distribution of assets upon death is to set up an inter-vivos trust, otherwise known as a living trust. A living trust is a legal entity created to own whatever property is transferred into it. The person who transfers the property is called a "grantor." In many states, living trusts can help families avoid estate tax and probate costs. A living trust allows women to pass assets to their children with less of a tax burden.

What to do now

Of course, these estate planning methods are not limited to women. In the event of the death of both parents, these same methods will provide for children. Since planning for the future at the lowest cost to your estate is the goal of estate planning, writing a will, creating a testamentary trust, and transferring property through a living trust are all excellent ways for women to get started.