Unmarried couples need to prioritize estate planning.
You have found someone you love.
You have moved in together.
Neither of you wants to get married.
And it seems this practice is becoming more common.
From 2007 to 2016, the number of cohabiting couples increased from 14 million to 18 million.
According to a recent CNBC article titled “Here’s what happens to your partner if you’re not married and you die,” this behavior can have unintended consequences.
First, you will miss out on tax benefits.
If you are not married, you cannot file a joint federal income tax return.
Although your employer may allow you to include a partner under the company health insurance policy, the amount contributed by your employer is taxable to you.
If you were including a spouse on the policy, the company contribution would be tax-free to you.
Other significant consequences involve estate planning.
Although estate planning is important regardless whether you are married or single, it is especially vital for cohabiting partners.
If you die without a will, your assets most likely will pass according to state intestacy laws.
Most states distribute assets to the spouse, children, and, only after that, to the nearest family members.
Creating a will is essential if you are wanting to ensure the transfer of your assets to your partner.
If you have a 401(k) or a Roth, these do not pass through a will.
Instead, they pass through beneficiary designations.
Accordingly, review all retirement accounts and make sure he or she is listed as the beneficiary.
The same is true of annuities and insurance polices.
Another consideration involves savings, checking, or investment accounts.
If both names are listed on an account as “joint tenants with rights of survivorship,” then it passes directly to the surviving partner.
What happens if only one name is on the account?
If you answered “probate,” then you would be correct.
Consequently, you will need to complete a pay-on-death or transfer-on-death designation form with the financial institution to ensure that the account is left directly to the surviving partner.
Do you have a home?
The name (or names) on the deed is important.
If only one person is named on the title, then the home will not pass directly to your cohabitating partner.
Instead, the home will enter probate with the rest of the intestate estate.
How might you fix this?
One way would be to retitle the home to include both names on the deed.
You should make sure title is held as “joint tenants with rights of survivorship and not as tenants in common,” and then record the deed with the county register of deeds for the county where the home is located.
Consequently, the surviving partner will take on full ownership after the death of the other without probate.
A significant change like this could trigger creditors, tax implications, and other expenses.
Alternatively, if you are a Kansas or a Missouri resident, consider creating a beneficiary deed as it will allow you to transfer the home to your partner without probate, but only upon your death.
Discuss any potential changes in asset titles and beneficiary arrangements with an experienced estate planning attorney to avoid causing problems for you or your partner.
Although preparing for your death is important when unmarried, you should also prepare for incapacity.
Did you know your partner has no say in your medical treatment and cannot access your medical records, absent proper legal authority from you.
To remedy this, you will need to appoint your partner as your health care agent through a durable owner of attorney for health care.
This allows your partner to make your health care decisions if you cannot do so yourself.
You can also create a health care treatment directive.
This document, customarily prepared along with the durable power of attorney for health care decisions, provides instructions for your end-of-life medical treatments.
Having this document in place gives your loved ones and medical personal directions according to your wishes.
You will also need a HIPAA authorization for release of medical information to your partner, whether that information is verbal or written.
This allows your partner to have access to your medical history.
Finances are also important when you are unmarried and incapacitated.
You should have a durable power of attorney in place so your partner can pay bills and manage finances if you are unable to do so yourself.
If you do not have these fundamental estate planning documents in place, a judge (who likely does not know you, your partner, or your family) will appoint someone to make these decisions on your behalf.
Reference: CNBC (Dec. 16, 2019) “Here’s what happens to your partner if you’re not married and you die”