Downs Law Firm, P.C.

unmarried couple

Estate Planning as an Unmarried Couple?

Please Share!

All couples can now take advantage of tax benefits for married partners, pass assets from one spouse to another with ease and qualify for Social Security spousal and survivor benefits. However, not all couples want to get married.

Traditional or non-traditional unmarried couples can marry, but not all couples wish to, according to a recent article from Kiplinger, “Marriage: When You’d Rather Not.”

Planning for a life together without the legal protections marriage provides means couples of all kinds who decide not to marry must be sure to do estate planning. Otherwise, an unmarried couple may be in life-altering situations concerning property ownership, parental rights, and inheritances. An estate plan is one of the most essential protections for unmarried couples. It’s a gift to give each other.

Start with a last will and testament. Unmarried couples without children need a will if they want to leave each other property. Otherwise, the laws of most states will have property going to the legal next-of-kin, which might be parents, siblings, or cousins. No matter how many decades the couple has been together if they are not married, they have no legal inheritance rights.

Consider the impact of inheritance taxes. Maryland imposes an inheritance tax of 10% for bequests of over $1000 to someone who is not a close relative. This includes nephews, nieces, and survivors of unmarried couples. If the survivor qualifies as a  “Domestic Partner,” jointly owned real property is not taxed. That should be documented to meet the required tests. However, other joint accounts and beneficiary designations of accounts except for life insurance also have a 10% even if they are not transferred by probate.

Other estate planning basics are essential to protect each other while living. Without documents like a financial power of attorney and a health care powers of attorney for both partners, medical and other health care providers might not allow your partner to make critical health decisions on your behalf. For couples where families disapprove of their unmarried status, asking a parent to make these decisions, especially in an emergency, could magnify a crisis or lead to a result neither partner wants.

Accounts with named beneficiaries, which typically include life insurance policies, retirement funds, investment accounts, and similar financial products, aren’t distributed by the terms of your will. Instead, they pass directly to beneficiaries on death. Even traditional married couples run into trouble when beneficiary designations are not updated.

Every time there is a life change, including death, birth, break-up, or any significant life event, updating beneficiaries is a good idea for all concerned.

Unmarried couples with children need to be especially diligent about estate planning. If a biological parent dies, their assets go to their biological children. However, when the non-biological parent dies, all of their assets could go to other relatives unless a will is in place and beneficiaries are appropriately named. What if the non-biological parent takes the step of legally adopting the children? They should still check on their parental rights. If accounts do not have beneficiaries named, the assets will go to the next-of-kin, a parent or sibling, and not the child or partner.

Homeownership is another financial issue to tackle for unmarried couples. They need a document clearly stating how the home is owned, how much each invested in the home, who is responsible for mortgage and tax payments, how to divide the home if it’s sold, and who has the right to live in the home if the couple breaks up or if one dies or becomes disabled. If a home is solely in one person’s name and the other partner dies, the surviving partner may end up being evicted if the right protections are not in place.

For unmarried couples, meeting with an estate planning attorney is necessary to protect each other now and in the future.

Reference: Kiplinger (June 16, 2022) “Marriage: When You’d Rather Not.”