Estate Planning Must-Haves for Unmarried Couples—Part 1

Estate planning for unmarried couples can be particularly critical, even though estate planning is often considered something couples only need to worry about after marriage. But the reality is, as an adult, regardless of age, income level, or marital status, you need to have some fundamental planning. Having a plan in place helps to keep the people you love out of court and out of conflict.

As an unmarried couple, even if you have been together for decades and act just like a married couple, you likely are not viewed as a married couple in the eyes of the law. In the event one of you becomes incapacitated or when one of you dies, not having any planning in place can have disastrous consequences.

If you’re in a committed relationship and have yet to get—or even have no plans to get—married, the following are estate planning must-haves:

Wills and Trusts

What Happens Without a Will

If you are unmarried and die without planning, your state’s intestate laws govern who receives the assets you leave behind. “Intestate” means without a Last Will and Testament.

Intestate laws state which of your family members will receive your assets starting with those closest to you on your family tree: your spouse, your children, then parents, siblings, and possibly even other, more distant relatives if you have no living parents or siblings.

In any case, intestate laws do not provide for unmarried partners. Given this, if you want your partner to receive any of your assets upon your death, you need to—at the very least—create a will bequeathing assets to your partner.

With a Will

A will details how you want your assets distributed after you die, and you can name your unmarried partner, or even a friend, to inherit some or all of your assets. However, certain assets like life insurance, pensions, and 401(k)s, are not transferred through a will. Instead, those assets will go to the person named in the beneficiary designation, so be sure to name your partner as beneficiary if you’d like him or her to inherit those assets.

Although wills and beneficiary designations offer one way for your unmarried partner to inherit your assets, they’re not always the best option. First and foremost, they do not operate in the event of your incapacity. In that case, your partner may not have access to needed assets to pay bills, or he or she could potentially even be kicked out of your home by a family member appointed as your guardian during your incapacity.

Moreover, a will requires probate, a court process that can take some time to navigate. Finally, assets passed by beneficiary designations go outright to your partner, with no protection from creditors or lawsuits.

Avoiding the Limitations of Wills – Trusts

Another option that addresses these limitations of wills and beneficiary designations is to place the assets you want your partner to inherit in a living trust. First off, trusts can be used to manage your assets in the event of your incapacity, not just upon your death. Second, trusts also do not have to go through probate, potentially saving your partner precious time and money. What’s more, leaving your assets in a continued trust that your partner could control would ensure the assets are protected from creditors, future relationships, and/or unexpected lawsuits.

Consult with us for help deciding which option—a will or trust—is best suited for passing on your assets.

Durable General Power of Attorney

When it comes to estate planning, most people focus only on what happens when they die. However, it’s just as important—if not even more so—to plan for your potential incapacity due to an accident or illness.

If you become incapacitated and haven’t legally named someone to handle your finances while you’re unable to do so, the court will pick someone for you. And this person could be a family member, who doesn’t care for or want to support your partner, or it could be a professional guardian who will charge hefty fees, possibly draining your estate.

Since it’s unlikely that your unmarried partner will be the court’s first choice, if you want your partner (or even a friend) to manage your finances in the event you become incapacitated, you would grant your partner (or friend) a Durable General Power of Attorney. Durable means that it will have effect even if you become incapacitated. General means that it is for many purposes and not limited, for example, to a specific transaction.

A Durable General Power of Attorney is an estate planning tool that will give your partner the authority to manage your financial matters in the event of your incapacity. He or she will have a broad range of powers to handle things like paying your bills and taxes, running your business, collecting government benefits, selling your home, as well as managing your banking and investment accounts.

Granting a Durable General Power of Attorney to your partner is especially important if you live together, because without it, the person who is named by the court could legally force your partner out with little to no notice, leaving your partner homeless.

Next week, we’ll continue with part two in this series on must-have estate planning strategies for unmarried couples. 

We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. Our initial appointment is called a Family Wealth Planning Session, during which you will get more financially organized and learn how to best support (whether financially or in other ways) the people you love. You can begin by contacting us or by scheduling a Family Wealth Planning Session.

Estate Plan, Family, Finances, Power of Attorney, Trusts, Unmarried Couples, Wills