Unmarried couples have to start thinking like married couplesArticle added by James R. Veal on September 22, 2011
James R. Veal
Joined: January 28, 2005
Ranked: #187 (336 pts)
Today, unmarried couples have to start thinking like married couples. Most of them are not aware of estate planning issues, proper planning and state laws.
Steve and Lucy were very much in love. In fact, they spent more than 5 1/2 years together, sharing their home and their lives as an unmarried couple. But when Steve died, his estate didn’t pass to Lucy, who needed the money badly.
Instead, it went to Steve’s sister, Rita, and Lucy lost the house she and Steve had shared. How can that be? I am certain the end result was probably not what Steve would have wished for prior to his death.
The number of unmarried couples living together is rising in the U.S. as many young adults having a hard time finding jobs and/or working in low-paying jobs are now “shacking up” with significant others. Most of them may not be thinking about estate planning issues now, but that may be a costly mistake down the road.
Unfortunately, the law is almost always written with conventional families that involve a married couple in mind — a man, a woman, 2.5 kids and a dog. Because the law often assumes that families are traditional, every state has its own provisions, such as those setting forth the spouse’s elective share and the rules of intestacy (dying without a will).
In some states, intestate descent laws take into account blood and marriage by giving a share of your estate to your children, or if there are no children, to your parents, rather than giving it all to your surviving spouse.
Incidentally, the intestacy rules in most states provide no distributive shares of your estate for family members who are not related to you by blood, marriage or adoption. Stepchildren and unmarried domestic partners — like Steve and Lucy — are typically excluded.
There are many unmarried couples who have lived together for multiple years that truly love one another, care about the well-being of their partner and still contemplate marriage. But, if they do not agree with the disposition imposed by the intestate laws of the particular state in which they reside, here are some important documents that they will likely need:
Will: It is very important to have a will because intestacy laws presume that your blood relatives will inherit your property after you die, when in fact you may want it to go to your partner, a friend or someone outside of your family.
Revocable trust: Each partner may set up a separate living trust for his or her separate property. These trusts can avoid probate, provide protection due to disability and enable assets to go to chosen beneficiaries. They can also be used to make gifts to friends, relatives, etc.
Durable powers of attorney: It is often used for business transactions and enables another person to spend your money, sign your name to binding documents and so on. Many unmarried couples might want their partners to have this kind of authority should they become disabled, injured or bedridden.
Health care powers of attorney: It allows your significant other to make medical decisions should you become incapacitated, but doesn’t provide him or her control over your bank account and other non-medical affairs.
Today, unmarried couples have to start thinking like married couples. Most of them are not aware of estate planning issues, proper planning and state laws. As financial advisors and planners, we are obligated to know our clients. It is our obligation to cover these important matters as it is a significant part of their financial plan. We need to make certain that our clients don’t end up like Lucy.
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