Without proper planning in place, unmarried couples put their family unit at risk. Due to asset acquisition and health decisions being more complicated for unmarried couples, among other things, estate planning is crucial. Here is a simple guide on how to protect your family’s future.
Protecting Shared Property
Equal contribution to the purchase of property does not necessarily mean that a surviving partner will have right to said property. It is necessary that both names are on the title. In addition, a ‘joint tenancy with right of survivorship‘ document will keep property out of probate should one of you pass away. This document is a form of co-ownership where two or more people share equal ownership and rights. Co-ownership will allow both of you to inherit and manage property affairs after the other has passed.
However, if only one of you has contributed to purchasing the home, creating a will or a revocable living trust can ensure that the property is given to the proper beneficiary. A common way to designate a particular beneficiary to receive property is through an enhanced life estate deed.
Control the Transfer of Assets
Partners need to designate one another as beneficiary of an employer retirement plan since non-spouses are not beneficiaries by default.
The Inherited IRA provision under Pension Protection Act of 2006 allows retirement plan assets to roll over to a new heir. However, an employer’s approval is necessary.
A ‘Pay on Death’ designation can allow one to choose the beneficiary of an account with a financial institution.
Couples should designate one another as beneficiary of life insurance policies.
Unfortunately, spousal benefits though Social Security are unavailable to non-spouses.
Protecting Health and Financial Decisions
In the case of incapacitation, it is important to prevent a court-appointed guardian or unwanted family members from making medical and financial decisions on a partner’s behalf. Unmarried couples do not have the same automatic powers that some married couples possess. Therefore, it is highly recommended that both partners complete a living will, as well as name one another for durable power of attorney in both finances and health care matters.
Naming one another for durable power of attorney for finances will allow both partners to manage the other’s financial affairs and assets. Similarly, naming one another for durable power of attorney for health care will allow both partners to make important medical treatment decisions on the other’s behalf. Life support decisions are also included in a medical power of attorney. However, this should be supported by a living will. A living will can specify in detail what life support administration the incapacitated partner prefers.
Quick Tips for Completing the Power of Attorney document:
- If both medical and financial powers of attorney are the same person, it is unnecessary to complete separate documents.
- Be sure to name one another as attorney-in-fact for both health care and financial power of attorney.
- The document allows individuals to determine how much control and power an individual attorney-in-fact will have.
Creating A Will
Aside from all of these documents, both partners will need a clearly defined will, to reinforce the powers and rights designated to the surviving partner. If one should pass without implementing a will, the state may have the authority to divide up assets. In which cause, the state may prioritize beneficiaries in ways that disinherit the surviving partner.
In order to better define the terms of a relationship, an unmarried couple may consider writing a Domestic Partnership Agreement. This document acts somewhat similar to a prenuptial agreement, and allows a couple to declare shared property and determine distribution of assets.
Learn how to get started on estate planning for unmarried couples. Contact the Law Offices of Christina Lesher at (713) 529-5900 today.