Estate Planning for Unmarried Partners

Estate planning creates a set of instructions specifying how your property is handled after death. While important for everyone, estate planning is critical for unmarried partners–opposite sex or same sex.

Avoid the State Default Plan

In a way, everyone has an estate plan. For those who haven’t created one, the state provides a default plan. Assets will probably go through a court process called intestate (no Will) probate. And a state’s default plan is probably not what most people want. State laws vary, but 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 receive none of your probate assets.

A Will Does Not Avoid Probate

A Will is a legal instrument that lists the person’s property (assets) and who should receive them after death (heirs). The assets a Will controls will have to go through probate before they can be fully distributed to the heirs. During probate, a Will becomes a permanent part of the 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 have a legal battle to receive any assets you leave to him or her.

How Joint Ownership and Beneficiary Designations Work

Even with a Will in place, not all assets 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 a beneficiary or joint owner is incapacitated when the owner dies, the court will get involved to protect the beneficiary’s interests. If a beneficiary or joint owner has died before or simultaneously with the owner, or the designation or title is otherwise invalid, those assets must go through probate and will be distributed according to the Will or, absent 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 their joint owner’s possible misuse.
• jointly owned assets are exposed to the 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 the joint owner can be complicated.
• joint ownership provides no asset protection to your joint owner after you die.

Joint ownership and beneficiary designations can avoid probate, but often cause unintended consequences–both for you and for your unmarried partner.

How a Revocable Living Trust Works

The superior tool to avoid probate is a fully funded Revocable Living Trust. This document lets you specify how you want your assets handled during your lifetime and after your death. You can be your own trustee and keep full control while you are living. You name a successor trustee, someone you know and trust, to uphold your instructions at your death or incapacity. The beneficiaries you name will receive distributions. Trusts cam be carefully structured to minimize tax exposure. Assets that remain in the trust are protected from your beneficiaries’ creditors and predators.

With a Revocable Living Trust, you can avoid the pitfalls of Wills, joint ownership and beneficiary designations:

• avoid the time, cost, loss of privacy, and loss of control of probate;
• avoid uncertainty and unintended consequences; and
• if you and your partner separate, you can change your trust without retitling or dividing assets.

A Revocable Living Trust gives you maximum control over your assets, and gives your unmarried partner maximum protection after your death.

Ensure Your Wishes Are Met after Your Death

Unmarried partners do not have the same protections and benefits 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 needed.