Estate Planning Tips for Unmarried Couples
February 24, 2017
By Cory Howes
For some of you, these statistics will be staggering:
- Per the U.S. Census Bureau, approximately 112 million people in the U.S. are unmarried;
- 45 percent of our country’s households are “unmarried households.”
- In 2013, the CDC found that “cohabitation [without marriage] is now a regular part of family life in the U.S.”
Sometimes, the law doesn’t keep up with the pace of societal change. If you and your significant other love each other but don’t want to tie the knot, you need an estate plan that takes into account your specific situation while protecting you both, along with any other family members or loved ones you wish to include.
Estate planning for married couples can seem pretty straightforward because it relies on long-standing, proven legal and tax strategies. Unmarried couples, however, may need to take a more individualized approach in order to achieve their goals. Here are some of the documents and methods you need to consider when creating or updating an estate plan.
Living trusts allow you to use your assets while you are alive and then bypass the probate process when transferring property to loved ones after you die. A trust can also keep your business out of the public record, and it can empower someone else to handle your finances if you become unable to do so. Though trusts may have higher up-front costs than some other solutions, the benefits they provide cannot be easily or reliably replicated with other planning options. On balance, a trust is the superior tool for many situations and can serve as the cornerstone of almost any comprehensive estate plan, especially for couples who have not formalized their relationships with a legal marriage.
A will can also be an effective planning tool on its own, or can serve as a “backup” and complement to a revocable trust. If your primary planning document is a will, it will name executors, guardians and provide for the distribution of your assets upon death. If you use a revocable trust as your foundational planning document, then when you die, a pour-over will directs that your assets are funneled (or “poured-over”) into your trust and then distributed to your beneficiaries per the terms and instructions of that trust. This method also helps wrap up loose ends, in case you didn’t transfer every last asset to your trust before you die.
What happens if you die without a will or other estate plan? Courts refer to this situation as “dying intestate,” and it means that the rules that will apply to your estate will be those written into your state’s laws. These laws rarely, if ever, account for long-term unmarried partners, so a will is essential to protect the person to whom you are committed. As an unmarried couple, you simply cannot rely on the intestate laws to work for you.
Most retirement accounts and many other types of accounts allow you to designate a “beneficiary,” or a person who will automatically receive what’s in the account when you die. Make sure you update your beneficiaries on your 401(k), IRA, or other retirement accounts, as well as on life insurance and other documents. Depending on how your estate plan is designed, your circumstances, and your goals, you may name one or more trusts as the beneficiary rather than an individual person.
Durable Power of Attorney, Healthcare Power of Attorney, and Similar Documents
These documents allow you to designate your significant other as the person who has the right to make certain types of decisions and sign documents on your behalf if you become incapacitated. If no such power exists, the decision-making task typically passes to a close blood relative and typically also requires a court proceeding called a guardianship or conservatorship, depending on the type of help you need and the laws of the state where you live. Your lawyer can help you determine which powers should be covered by documents like these to ensure that enough authority is granted while still providing protection against unauthorized actions.
Whether you’ve been living with a life partner for decades, and you’re now eyeing retirement options; or you’re just beginning a family with a person who has not formally and legally been recognized as your spouse, you probably have questions. How should you protect yourself and family financially as you get older? What can you do to enshrine the values you hold dear for the next generation? What if an unwanted event happens, throwing you and your partner off balance — what contingency plans can be put in place?
Our experienced estate planning attorneys can help you identify a strategy to get the peace of mind you need. Contact me today to set up your consultation.