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Non-Married Couples

‘Till Death Do Us Part, Too: Estate Planning Tips for Commitment Without Marriage

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Advice columnist Ann Landers once observed that “love is friendship that has caught fire.”  If that’s true, there are thousands of ways for that blaze to unfold.  For many Americans, such devotion and passion do not need to be neatly formalized as marriage.

In fact, our cultural norms are shifting, and quickly.  Consider the following:

  • 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.”

Unfortunately, the law has not kept up with these societal trends.  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.

1. Living Trusts

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.  Even though trusts tend to cost more up-front than related solutions, the benefits they provide cannot be easily or reliably replicated with other planning options.  On balance, a trust is the superior tool for virtually everyone; it should be the cornerstone of almost any comprehensive plan, especially for couples who have not formalized their relationships with a legal marriage.

2. Wills

A pour-over will can be an effective “backup” and compliment to a revocable trust.  When you die, your assets get funneled into (or “poured-over” into) your trust and then distributed to your beneficiaries per the terms and instructions of that trust.  The pour-over will keeps things simple, making the process less stressful (and prone to error) for your executor and trustee.  It 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 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.

3. Beneficiary Designations

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 trust is designed, your circumstances, and our goals, you may name one or more trusts as the beneficiary rather than an individual person.

4. Power of Attorney, Designation of Health Care Surrogate, 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 what state you in 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 wife or husband, 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.  Please call or contact us to schedule a private consultation.

Not Married? You’re Not Alone. But You Still Need a Plan. Estate Planning for People Living Together, Bachelors, and Bachelorettes

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Approximately half of America’s population over the age of 16 is unmarried. While much of the discussion involving estate planning focuses on married couples, this topic is just as important for a single person. In fact, many times it is even more important that a single person have a well-coordinated estate plan. This is because the default laws governing estates often work poorly for people without a spouse and may not adequately provide for a significant other or unmarried partner. Having a cohesive and well-drafted estate plan will ensure that you protect and provide for those you truly care about upon your death.

Evolving Estate Planning

It is important to understand that your estate plan can change over time. You may eventually experience life changes like getting married, having children, or buying your first home that will necessitate changes to your estate plan. Although life is constantly changing, it is best to get in the driver’s seat early when it comes to estate planning.

If you die without a will — referred to as intestate — all of your possessions will be distributed according to the default laws of your state. While most state laws have a married person’s assets go to their surviving spouse and children, the same is not true for unmarried individuals. Generally, state law provides that a single person’s assets are passed on to their next of kin. This includes children, parents, and siblings. Noticeably absent for many unmarried people are provisions providing for a long-term boyfriend or girlfriend. And, if there are no surviving close relatives, the assets will likely go to the state. To avoid the state dictating what happens to your assets, it is vital that you have a properly drafted estate plan put together.

As an Unmarried Person, How You Own Things Is Very Important

There is an increasing number of couples that are not getting married, and other individuals who are deciding to remain single. For this group, estate planning is important because taxes and other financial benefits tend to favor those who have tied the knot. It also brings up the need to be very careful about how assets are titled.

How your assets are titled and how the beneficiary designations are prepared will impact how your assets will be distributed upon your passing. The most common ways to hold title to property is tenants in common (TIC) and joint tenants with rights of survivorship (JTWROS). Property that is held as TIC means that each owner owns an interest in the property. At the death of one owner, that interest is transferred according to his or her estate plan, or intestate succession if there is no estate planning. This is not an ideal way for unmarried couples to own property because at the death of one of them, the other person will end up as joint owner with the deceased’s next of kin. JTWROS is one option for unmarried couples because when one owner dies, the property automatically transfers to the surviving owner. There are several other planning strategies that can be beneficial for unmarried individuals — involving tax benefits, retirement plans, wills and trusts, and healthcare powers of attorney — if the right estate plan is carefully crafted.

Speak to an Estate Planning Attorney

If you do not have an estate plan yet, you should contact a knowledgeable estate planning attorney today. Whether you are married, single, or cohabiting with a partner, these professionals can help you craft a comprehensive financial plan that is tailored to your personal situation and assists you in protecting those you care for the most. Call or contact us today so we can help.

The Perils of Joint Property

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People often set up bank accounts or real estate so that they own it jointly with a spouse or other family member.  The appeal of joint tenancy is that when one owner dies, the other will automatically inherit the property without it having to go through probate.  Joint property is all perceived to be easy to setup since it can be done at the bank when opening an account or title company when buying real estate.

That’s all well and good, but joint ownership can also cause unintended consequences and complications.  And it’s worth considering some of these, before deciding that joint ownership is the best way to pass on assets to your heirs.

So let’s explore some of the common problems that can arise.

The other owner’s debts become your problem.

Any debt or obligation incurred by the other owner could affect you.  If the joint owner files bankruptcy, has a tax lien, or has a judgment against them, it could cause you to end up with a new co-owner – your old co-owner’s creditors!  For example, if you add your adult child to the deed on your home, and he has debt you don’t know about, your property could be seized to collect that debt.  Although “your” equity of the property won’t necessarily be taken, that’s little relief when the house you live in is put up on the auction block!

Your property could end up belonging to someone you don’t intend.

Some of the most difficult situations come from blended families.  If you own your property jointly with your spouse and you die, your spouse gets the property.  On the surface, that may seem like what you intended, but what if your surviving spouse remarries?  Your home could become shared between your spouse and her second spouse.  And this gets especially complicated if there are children involved: Your property could conceivably go to children of the second marriage, rather than to your own.

You could accidentally disinherit family members.

If you designate someone as a joint owner and you die, you can’t control what she does with your property after your death.  Perhaps you and an adult child co-owned a business.  You may state in your will that the business should be equally shared with your spouse or divided between all of your kids; however, ownership goes to the survivor – regardless of what you put in your will.

You could have difficulty selling or refinancing your home.

All joint owners must sign off on a property sale.  Depending on whether the other joint owners agree, you could end up at a standstill from the sales perspective.  That is unless you’re willing to take the joint owner to court to force a sale of the property.  (No one wants to sue their family members, not to mention the cost of the lawsuit.)

And what if your co-owner somehow becomes incapacitated, through accident or illness?  In that case, you may have to petition a court to appoint a guardian or conservator to represent the co-owner’s interest in the sale.  While you and your co-owner always worked together, an appointed guardian may see his responsibility as protecting the other owner’s interest – which might mean going against you.

You might trigger unnecessary capital gains taxes.

When you sell a home for more than you paid for it, you usually pay capital gains taxes – based on the increase in value.  Therefore, if you make an adult child a co-owner of your property, and you sell the property, you’re both responsible for the taxes.  Your adult child may not be able to afford a tax bill based on decades of appreciation.

On the other hand, heirs only pay capital gains taxes based on the increase in value from when they inherited the asset, not from the day you first acquired it.  So often, while people worry about estate taxes, in this case – inheriting a property (rather than jointly owning it) could save your heirs a fortune in income tax.  And with today’s generous $5.49 million estate tax exemption, most of us don’t have to worry about the estate tax (but the income tax and capital gains tax hits almost everyone).

You could cause your unmarried partner to have to pay a gift tax.

If you buy property and place it in joint tenancy with an unmarried partner, the IRS will consider that to be a taxable gift to your partner.  This can create needless paperwork and taxes.

So what can you do?  These decisions are too important and complex to be left to chance.  Consult a law firm that specializes in estate planning.  A good lawyer will help you decide the best way to manage your property to meet your needs and goals.

Our team can assist you in planning to reduce estate taxes, avoid potential legal pitfalls, and set up a trust to protect your loved ones.  We understand not only the legal issues but the complex layers of relationships involved in estate planning.  We’ll listen to your concerns and help you develop a plan that gives you peace of mind while achieving all of your goals you have for your family.  Call or contact us today for a consultation.