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. Revocable Trusts
Revocable 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 upfront 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.
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 your goals, you may name one or more trusts as the beneficiary rather than an individual person.
4. Financial Powers of Attorney and Health Care Surrogates
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, decision making typically passes to a close blood relative and may also require a court proceeding called a guardianship or conservatorship, depending on the type of help you need and your state of residence. 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? We can help you work through these questions and create an estate plan that is right for you.