Estate Planning for Unmarried Couples

The number of Americans living with an unmarried partner reached about 18 million in 2016, up 29% since 2007. Roughly half of cohabiters are younger than 35 – but cohabitation is rising most quickly among Americans ages 50 and older. (1)

As more couples choose to live together outside of marriage, laws about how to plan for the future as a couple may change. For now, planning for the future as an unmarried couple is different than planning as a married couple. There are laws in the US that specifically help married couples plan for the future. There are not any special designations in the law for the care or rights of a non-spouse partner.

Let’s look at how to plan for your future financial and healthcare concerns as a couple.

Financial Rights

If you get sick and need hospital care, what will happen to your finances? Make sure that your partner has access to all of the financial resources you both have and can pay for your care and handle any bills or other financial issues while you are out of commission.

One way to do this is with a Financial Durable Power of Attorney. Basically this gives the right to your partner to make financial decisions in your name so that there are no bars on doing what needs to be done while you are not able to.

Protect Your Healthcare

If you or your partner should become incompetent or incapacitated, you may want your partner to make decisions about your health. A spouse automatically has some say in what kind of healthcare you receive if you are unable to make decisions for yourself. However, an unmarried partner does not have any say unless you legally give it to them.

A Medical Power of Attorney, also called a Durable Power of Attorney for Healthcare, lets you make the decision about who will call the shots if you are unable to care for yourself. This document lets you state your wishes about advanced directives such as resuscitation, IV nutrition and hydration, and other kinds of care such as dialysis.

Whatever you do not cover in your medical power of attorney is left for your “agent” to decide. If you choose your partner as your “agent”, then they will make these types of healthcare decisions for you if something unexpected should happen.

Dying Without a Will

In North Carolina, whether you are married or not, dying without a will subjects your estate to intestate laws and probate court. Intestate laws govern what happens to your estate when you don’t have a will and they affect every decision a judge makes in probate court regarding your estate.

As a non traditional couple, it is even more important to have a will that lays out exactly what you would like to happen when you die. Otherwise, everything you own could go to parents and brothers and sisters despite your good intentions to let your partner inherit.

Intestate Laws Favor Blood Relations

Intestate laws give quite a bit of stock to blood relations. A cohabiting partner will not receive any assets in this kind of situation unless you plan for their future care. Without a will, you need to make sure that your cohabiting partner is named as beneficiary on your accounts and has right-of-survivorship or transfer on death rights.

Ways to Leave Assets to a Partner

There are certain types of assets that do not pass through probate court when you die. These are the types of assets that you can know will go to your partner regardless of any lobbying in probate court by other family members to receive more of your estate.

Bank Accounts

Bank accounts owned jointly with right-of-survivorship will automatically pass on to your partner. It is important to check this designation with your bank and be sure that the account is titled in this way. Good intentions will not leave the account to your partner. If you don’t have the proper designation on the account, it will go through probate and could end up frozen until a blood relative inherits the account.

Real Property

Real Property owned with your partner as Joint Tenants With Right of Survivorship (JTWROS) will automatically transfer ownership to your partner if you die. Any expensive item such as a car or home, vacation home, or land can be titled this way so that you can be sure what will happen to it in the future.

Living Trusts

Also called a revocable trust, this is a sort of framework that is created to manage your assets. It has its own property and taxes just like a business. Assets put in the living trust can also be taken out again.

Living trusts can hold real property or most any type of accounts and can be written to give money to beneficiaries at the times and in the amounts you so desire. If you want your partner to receive a certain amount of money each month for life, a living trust could accomplish this.

Life insurance

A life insurance policy pays out to whoever is declared as the beneficiary of the policy. This type of inheritance does not go through probate and is automatically inherited upon your death unless there is something suspicious.

Retirement Accounts

Retirement accounts such as IRAs or 401Ks that specifically name your partner, with transfer on death rights as a beneficiary, will go directly to your partner upon your death. If a spouse inherits a retirement account, they can transfer the money into their own IRA and use it as their own retirement account money.

As a partner (non-spouse), the rules are different. A non-spouse can choose to move the retirement account assets into their own inherited IRA or take a lump sum withdrawal. Because the non-spouse partner is a beneficiary of a retirement account or traditional IRA, they must include in their gross income any taxable distributions they receive. (2)

Go Ahead and Make a Plan

As an unmarried couple, it is important to make a plan that keeps the two of you safe should you have healthcare needs. Making plans for the future financially is also crucial for retirement or future long term care needs. Because of different treatment by the law, it is even more important to look at your options and make wise decisions about your estate plan.

Seek Wise Counsel

With constantly changing laws and new laws being written every year, it can be hard to keep up with what the best solutions are for estate planning. There are ways to make decisions that will keep you and your family safe and financially stable. If you need help working through planning your estate, contact a knowledgeable attorney in estate planning who can walk you through the latest legal tools and regulations that can help you keep more money for yourself and for your heirs.