Till Death Do Us Part, Too

Are unmarried couples living together the new norm?

Considering the following information:

  • 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.”

As the norm shifts in regards to peoples views on marriage, the law has not kept with this societal trend.  Couples need to be aware of the rights that they give up when they choose not to marry.  For example, married couples are allowed to leave their entire estate to their surviving spouse tax-free.  Everyone else is subject to pay tax on amounts over the exclusion amounts (which is $5.49 million for 2017).

The estate tax is not a major concern most individuals, but there are other benefits to consider as well.  Social security, immigration status, joint bankruptcy filings, hospital visits and inheritance benefits.

Without any planning, if one person dies, the survivor is not entitled to any benefits, notice in a probate proceeding or continuing support that is afforded to legally married couples.

Consider the following examples:

Mike and Molly have been together for a number of years, but have decided that marriage is not for them.  A few years back, Molly sold her house and moved into Mike’s house.   She has been contributing towards expenses and the mortgage.  However, they never changed the title on the house and it’s still only in Mike’s name.  Mike and Molly never got around to making an estate plan. Mike dies unexpectedly.   Since the Mike and Molly were never married and her name wasn’t on the deed, Molly has no right to stay in the house and Mike’s family can force her to move out even if she has been contributing to maintain the house.

Sarah and Jim both live far away from their family, who neither are particularly close to.  They plan on getting married at some point but is not the right time.  Sarah and Jim are in an accident that that leaves Sarah unresponsive.  Since they are not married, Jim cannot make any healthcare decisions for her.  Instead, Sarah’s family flies into town and starts making decisions that Jim knows Sarah wouldn’t want.  Her family prevents Jim from seeing Sarah and there is nothing he can do.  If Sarah ultimately dies, her family would be entitled to any assets that were solely in her name.

The above examples are some examples what could happen if unmarried couples don’t take the proper steps to protect each other in the even something unexpected happens.

Here some steps you can take:

Establish a Revocable Living Trust

A Revocable Living Trust allows 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 a 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.

Wills

A Pour-Over Will can be an effective “backup” and compliment to a revocable living 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.

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 your goals, you may name one or more trusts as the beneficiary rather than an individual person.

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. An attorney 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 be 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?

An attorney is a good place to start to what you need to make sure your partner is protected.