June 3, 2013   Estate Planning

Estate Planning for Unmarried Partners: Ensuring Your Wishes Are Met After Your Death


Estate Planning for Unmarried Couples Estate planning is creating a set of instructions that specify how you want your property handled after your death, and how you want your property and health care decisions handled during any period you may be incapacitated. Proper estate planning is important for everyone. But for unmarried partners—opposite sex or same sex—an estate plan is critical. In part one of this two-part article, we’ll look at some issues to consider for your after death estate planning.
 
Why Estate Planning for Unmarried Partners Is Critical
Avoid the state default plan
 
In a way, everyone has an estate plan. If you haven’t created one, your state has a default plan for you. Your assets will probably go through a court process called intestate (no Will) probate. And your state’s default plan is probably not what you would have wanted. State laws vary, but generally, they direct assets to the closest family members. How a state determines who are the “closest” family members often is complicated for non-nuclear families. But one thing is certain.
 
A nonfamily member, like an unmarried partner, will not receive any of your assets.
 
How a Will Works
But do you really want to put your loved ones through probate?
 
A Will is a legal instrument that lists your property (assets) and who should receive them after your death (heirs). If you have a Will, the assets it controls will have to go through probate before they can be fully distributed to your heirs. During probate, your Will becomes a searchable public record. Probate proceedings vary from state to state, but many people view the time, cost, loss of privacy, and loss of control that come with probate as unnecessary evils that should be avoided. The process also invites family members to contest the Will.
 
A nonfamily member, like an unmarried partner, may not receive the assets you leave to him or her in your Will.
 
How Joint Ownership and Beneficiary Designations Work
One way to avoid probate
 
Even with a Will in place, not all of your assets may go through probate. Assets with a valid beneficiary designation pass outside probate to the named beneficiaries, and property owned jointly with right of survivorship will automatically transfer to the survivor. But if your beneficiary or joint owner is incapacitated when you die, the court will get involved to protect his or her interests. If your beneficiary or joint owner has died before or simultaneously with you or the designation or title is otherwise invalid, those assets will have to go through probate and will be distributed according to your Will or, if you don’t have one, under the default state law.
 
Often, unmarried partners will put both names on a title (especially a home) to ensure the asset will pass to the surviving partner upon the death of the first. But this can create problems.
  • jointly owned assets are exposed to your joint owner’s possible misuse of them
  • jointly owned assets are exposed to your joint owner’s creditors
  • jointly owned assets can trigger gift tax issues and income tax issues
  • removing a joint owner can be difficult
  • leaving a jointly owned asset to anyone other than joint owner can be complicated
  • joint ownership does not provide any asset protection to your joint owner after you die
 

Joint ownership and beneficiary designations can be effective tools to avoid probate, but often cause unintended consequences—both for you and for your unmarried partner.
 
How a Revocable Living Trust Works
A better way to avoid probate
 
A far better way to avoid probate is to establish and fully fund a Revocable Living Trust. A Revocable Living Trust is a powerful estate planning tool that keeps you in the driver’s seat. You create a Revocable Living Trust during your lifetime and specify how you want your assets handled during your lifetime and after your death. You name a Trustee to oversee the Revocable Living Trust. You can be your own Trustee while you are alive. And you get to name your successor Trustee—a person or a trust company you trust to continue to uphold your wishes after your death. You name your beneficiaries, who can receive distributions under the trust. Trusts are carefully structured to minimize tax exposure. While held in the trust, your assets are protected from creditors and predators—yours and your beneficiaries’.
 
With a Revocable Living Trust, you can avoid the pitfalls of Wills and joint ownership and beneficiary designations.

  • avoid the time, cost, loss of privacy, and loss of control of probate
  • avoid uncertainty and unintended consequences
  • if you and your partner separate, you can simply change your trust without retitling or dividing assets
 
A Revocable Living Trust gives you the maximum control over your assets, and gives your unmarried partner the maximum protection after your death.
 
Ensure Your Wishes Are Met after Your Death
An estate plan gives you and your partner peace of mind
 
Unmarried partners do not have the same protections and benefits under the law that married partners have. An estate planning attorney who has experience working with unmarried partners can help you navigate the issues and make sure your after death plan will work the way you want it to work when it is needed.
 
Next time, we’ll look at special considerations for unmarried partners in planning for incapacity.
 
 
 
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