Couples decline to marry for a variety of reasons. Some are pragmatic, such as protecting health insurance eligibility. Taxes are another reason, as is qualifying for government benefits, like Medicaid or needs-based student financial aid. However, a recent article from the Journal of Accountancy, “Forgoing marriage? Estate planning for unmarried couples,” explains why unmarried couples must protect themselves from life’s unexpected but inevitable events.
There is an old saying that marriage is the cheapest estate plan available, and in part, this is true. Here’s what unmarried couples can do to protect themselves.
How are assets titled? Having the home titled as a joint tenancy/ownership with the right of survivorship protects both partners. If one partner dies, full ownership automatically switches to the other partner, with no need for court documents or other paperwork.
Beneficiary designations. Each partner should review the beneficiary designations on all applicable financial accounts and products. This includes life insurance, pensions, retirement accounts, and, if possible, bank accounts. If the couple doesn’t want to make each other joint owners of the bank accounts, see if they can be added as beneficiaries.
Cohabitation agreement. This document clarifies everything from financial responsibilities during and after the relationship, from who will care for a shared pet to the distribution of jointly owned property if there is a breakup. Think of it as a prenup for unmarried people.
Power of Attorney. This allows the partners to step in and manage each other’s affairs if one should become incapacitated. It’s also effective if one person travels and needs the other partner to manage daily financial matters.
Advance Care Directive. This document states a person’s wishes about medical care if they cannot communicate on their own. It should include a Health Care Power of Attorney, allowing the partners to make medical decisions for each other. Without it, adult children, siblings, or parents will be the only ones who can make these decisions. This will also permit the partners to access personal health information for each other during an illness or an emergency.
Last Will and Testament. Distribution of property or assets not owned jointly takes place through the will. The will is also used to name an executor in charge of the estate and carrying out the instructions in the will, as well as a guardian for minor children. If there is no will, an unmarried surviving partner will have no control over any property or assets. Without a will, the laws of intestacy take control, and usually surviving children, parents, siblings and even distant cousins who are related by blood come before the unmarried partner.
Trusts. If the couple wishes to keep their possessions and distribute them privately, a trust can be created to own assets, with the trustee being one partner and the successor trustee being the other. Couples with minor children, shared real estate investments, or assets in more than one state may find using trusts more efficient than passing assets through a will. Assets in a trust are not subject to any instructions in a will, do not become public and do not go through probate.
A consultation with an estate planning attorney can provide unmarried couples with a clear path to protect each other for the rest of their lives. This is the peace of mind provided by an estate plan.
To learn more about estate planning in the East Valley, Gilbert, Mesa and Queen Creek, schedule your free consultation with Attorney Jake Carlson by using one of the links above.
Reference: Journal of Accountancy (April 30, 2024) “Forgoing marriage? Estate planning for unmarried couples”
