[ad_1]
1. Understand the Legal Landscape
While the difference between being a “married” or “unmarried” couple may seem as inconsequential as a piece of paper, your legal relationship status can have a big impact on numerous aspects of your life. Spouses of military members are afforded special privileges and benefits. If you’re married you may be able to join your spouse’s healthcare plan.
Put simply, legalizing your marriage affords each partner certain automatic rights. Other examples include:
- Being named next of kin by probate court
- Tax savings and benefits in some situations
- Divorce entitlements
- Access to each other’s estate
- Qualification for spousal Social Security benefits upon retirement
With regard to estate planning, each state has its own set of laws to address inheritances and property rights. But in most cases, if an unmarried partner dies without a will, the probate court will direct all assets to their family. This means their remaining partner legally can’t claim ownership over any part of the estate they are not a joint owner or direct beneficiary of, such as an insurance policy.
For this reason, unmarried couples should seriously consider establishing a thorough estate plan that protects their right to each other’s legacy. If you haven’t already, consult an attorney who is familiar with your relationship and can help determine what legal documents are needed to protect your rights.
2. Establish Clear Wills and Beneficiary Designations
Whether married or not, establishing a will and selecting beneficiary designations are critical aspects of any well-rounded estate plan.
Your will allows you to dictate who receives your property or assets after your passing. If you and your partner have minor or dependent children, it can also designate a caregiver for them. Additionally, a will indicates who you’d like to serve as executor of your estate. This person is responsible for making sure your property is distributed exactly as outlined in your will.
Beneficiary designations are also incredibly important—especially since they technically overrule a will. If your will indicates that you want someone to inherit your IRA, but the IRA has a different person listed as the beneficiary, the account will go to whoever is listed as the beneficiary. This can be potentially problematic. For example, if your will states that your current spouse should receive your IRA, but the IRA beneficiary is listed as your former spouse who you no longer have a relationship with, it will still go to your former spouse. It is critical to keep your beneficiary designations up-to-date to avoid complications in executing your legacy.
Common policies or accounts with beneficiary designations include:
- 401(k) or 403(b) plans
- IRAs
- Life insurance policies
- Pension plans
- Annuities
If you’re concerned that the contents of your will may be overruled or unenforceable, this is something your financial advisor and estate attorney can help you assess.
3. Consider Joint Ownership and Property Rights
You and your partner may jointly own property, bank accounts, and credit cards. Joint ownership can benefit unmarried couples by allowing the account or property to stay with the surviving owner if one partner passes.
In terms of property ownership and rights, there are two essential concepts to know: joint tenancy and tenancy in common.
Joint tenancy: Both parties obtain equal shares of a piece of property. They receive the same deed simultaneously, and each owns 50% of the property. If one owner passes away, the property’s title passes to the other surviving owner.
Tenancy in common: Two (or more) parties own a piece of property. Each owner can control a different percentage of the property, meaning you don’t have to split the property 50/50 with your partner. Unlike joint tenancy, the surviving property owner does not automatically receive the other owner’s rights to the property when they pass. Instead, their percentage of the property goes to their estate, and a beneficiary can be named the rightful heir.
There are pros and cons to each type of property ownership. To determine which option is right for your family, you’ll want to go over your options with your estate attorney.
4. Create Advance Directives and Powers of Attorney
Estate planning for unmarried couples isn’t just about distributing property after death. It’s also important to have safeguards in place that allow your partner to help you in a medical emergency.
At some point in your life you may become incapacitated, or cannot otherwise make decisions for yourself. If you want your long-term partner to be the one communicating your wishes and making decisions on your behalf, you’ll need to detail these arrangements ahead of time in your estate plan.
The documents you and your partner will need to complete include:
Advanced health directive or living will: This document provides instructions for your medical care, and it’s meant to be used when you cannot communicate on your own. It can indicate whether you want certain measures to be taken by your doctors, if you’re an organ donor, pain management preferences, and other important considerations.
Medical power of attorney: A medical power of attorney gives another person the authority to make decisions on your behalf if you become incapacitated or otherwise unable to communicate. This document can also be referred to as a durable power of attorney for healthcare or a healthcare proxy.
While your living will allows you to communicate your wishes for certain specific occurrences, decisions may arise during a medical emergency that aren’t covered in the document. That’s why it’s essential to also name someone you trust—like your partner—as a medical power of attorney so they can make decisions and advocate on your behalf.
5. Explore Domestic Partnership Agreements
A domestic partnership agreement is a document that includes specifics about a couple’s relationship and provides instructions in the event of a breakup or death. This agreement can serve to:
- Keep each partner’s debts and liabilities separate from the other person.
- Clarify which partner is responsible for what household expenses.
- Outline who receives what assets or property in the event of a breakup.
- Keep each partner’s finances separate.
- Dictate how a partner’s estate should be distributed after passing. This serves as more of a supporting document for your will—it’s not intended to replace your will altogether.
Some states or cities uphold domestic partnership agreements as legally-binding documents. However, not all places in the United States recognize domestic partnerships or extend marriage rights to domestic partners.
Whether your state recognizes this kind of agreement or not, it can be helpful to have a document you or your spouse can reference when establishing or executing an estate plan.
6. Seek Professional Guidance
Establishing an estate plan as an unmarried couple is advisable, and requires a few extra precautionary steps to ensure your final wishes are executed appropriately. As you start preparing your estate plan, we highly recommend consulting with an experienced estate planning attorney—ideally one with experience in helping unmarried couples.
It’s important to include your financial advisor in these conversations as well. They can help you create a comprehensive and thoughtful estate plan tailored to your unique situation. Additionally, as your financial life changes—you acquire new property, open new accounts, etc.—your advisor can keep you on track with updating your estate plan accordingly.
The peace of mind that comes with a deliberate and thorough estate plan is invaluable, and we encourage you to take the steps now to protect your assets, your partner and preferred beneficiaries, and your final wishes for the future. To learn more about how Abacus can help, schedule a time to meet with our team.
Sources:
[ad_2]
