When it comes to estate planning, the conversation focuses on married couples rather than unmarried individuals. Marriage rates have been declining since the 1990s, with an even steeper drop recorded in recent years. Many individuals do not feel the same pressure to include marriage in their life plans. With no sign of a soaring upswing to marriage rates, how can you prepare for the future with your unmarried partner?
It is important to note that the same default estate planning rules for married couples do not apply to unmarried couples. Further, without a valid estate plan, even married individuals cannot rely on the surviving spouse to inherit everything if one spouse dies. Therefore, unmarried couples must exercise particular caution when it comes to protecting themselves and their partners.
This article will cover three questions that unmarried couples should take into account when drafting an estate plan.
#1 – Should you combine income and assets?
There is no single answer to sharing finances. You and your partner must decide what works best for your lifestyle and circumstances.
Some couples may choose to maintain separate bank accounts but also have a shared account for joint expenses. With both partners’ names on the joint account, each can access all of the money in the account. In this scenario, both partners should seriously consider the advantages and disadvantages. If one partner passes away, having a joint account can ensure that the surviving spouse has sufficient finances to pay utility bills, rent, and funeral expenses.
On the other hand, unmarried individuals must consider the risks of a joining account should the relationship end on a sour note.
#2 – Which estate planning documents do both partners need?
As uncomfortable as it may be, all couples must consider what would happen if one partner dies or becomes incapacitated. Marriage comes with additional legal recognition for the surviving partner. For unmarried couples, the surviving partner would be powerless. Unmarried couples have to discuss if they are both okay with the courts dictating financial and health decisions, as well as distributing their belongings.
To communicate end-of-life wishes regarding assets, health, and finances, both partners need, at a minimum, a last will and testament, power of attorney, and advance medical directive. These documents will ensure that, if you wish, your surviving partner can legally make decisions on your behalf, as well as inherit your belongings.
#3 – What about living arrangements?
Unmarried couples need to consider how their current living arrangements would change if one partner passes away or if the relationship otherwise ends. Breaking a lease is relatively straightforward no matter the marital status, but owning a home makes things more complicated.
If one partner has their name on the deed, but both partners contribute to the mortgage, the non-homeowner is at risk. If the homeowner dies without an estate plan, the worst-case scenario is that the unnamed partner will not have a legal claim to the home. It is also unlikely that they will be able to recover any of their financial contributions.
Unmarried couples should consult with an estate planning attorney on the laws of their state regarding titling or home-ownership to ensure they have the necessary protection and agreements in place.
Remember, while talking about the potential death or incapacitation of a loved one is not easy, all couples need to plan for the worst. Unmarried couples face additional legal challenges, so the questions to ask are different. These questions are: 1) Should you combine income and assets? 2) Which estate planning documents do both partners need? and 3) What about living arrangements?
Estate planning can be a daunting task for individuals, never mind unmarried couples. Consulting with an estate planning attorney will make the process easier and make sure that you and your partner have the protection you need so that you can live stress-free.