People often live together to find out if they’re compatible. As I age, this notion seems more and more naive. As life unfolds, an array of many different circumstances arise to ask again, “Are we compatible.” A short test of cohabitation is a small sample.
As a young lawyer, I represented many clients in divorce cases. I was shocked by how many people were getting divorced after, 20, 30, and even more years of marriage. I assumed that after that long a time together, they were indeed compatible, and were marching on in lockstep into their golden ages.
Not exactly. Other tests of compatibility arise over time, such as the birth of a child, balancing career aspirations, dealing with in-laws and third persons in the relationship, health issues, disappointed expectations, illness, retirement adjustment, and on and on.
Even something as promising as a vacation can pose surprising challenges. My wife, Margie, and I have had some of our most difficult discussions (arguments) about our time to relax. I like exploring a variety of new places. She wants to go to one place and relax. Where to go, for how long, what to pack, and even our time of departure all pose challenges to work out. We’re not always so compatible there.
I tell my new employees to pay attention because the greatest love stories in the world walk through our doors every day. We meet spouses and other family members every week who are selflessly caring for those who are losing the ability to cope for themselves. They come in with tears and frustrations and love. It is truly an honor to work with these clients.
They turned out to be compatible.
If you’re familiar with Nicholas Sparks, the author of “The Notebook” and many other tearjerker stories, note that he is a recovering Estate Planning Attorney. I see where the day to day practice with families in these trying circumstances provides ample material.
Living together without marrying can also be costly in Maryland when someone dies. We have a fairly unique and unfair inheritance tax of 10% if you leave assets to someone who is not a close relative. Parents, spouses, children, and descendants are all exempt from this tax, as are siblings. Everyone else, including nephews, nieces, and even live-in significant others, pay the tax.
A long term domestic partner is now exempt from paying taxes only for jointly owned real estate. Life insurance paid directly to a partner is exempt from tax. Everything else, including IRAs, paid on death accounts, and jointly owned investment and bank accounts are taxed. This often comes as a shock to many grieving partners.
Cohabiting couples often assume that they will be the medical spokesperson for their partner at the hospital and will handle finances during a rehabilitation. Without the right documents in place, this is often not the case.
With a little forethought, attention, and planning, you can select who is in charge, who gets things, and when they get them. This is the essence of estate planning.
Consider a few other issues for unmarried couples.
Cohabitation Challenges: Protecting Minor Children
According to the Pew Research Center, in 2017, about seven percent of children in the U.S. are living with cohabiting parents. With more than five million minor children living with cohabiting parents, issues of income stability, custody, and inheritance have likewise increased.
The issues are only magnified by the fact that cohabiting relationships tend to be less long-lasting than married relationships. Children of cohabiting parents tend to be adversely affected when it comes to separation or death of a biological or non-biological parent.
Breaking Up
In the U.S., cohabiting individuals are treated as strangers under the law. What if the two of you break up, but only one of you has a biological tie to a minor child and the other does not? What happens to family relationships? Barring a second-parent adoption, the non-biological parent may have no right to see the child or otherwise participate in the child’s life. This can be emotionally damaging to the child, who may have a strong connection with the non-biological parent.
To lessen the emotional turmoil of a cohabiting parent breakup, where one parent is not a biologic parent, consider second-parent adoptions, if available in your state, or a co-parenting agreement that takes into account custody and support.
Having a will that sets forth your preferences about guardianship will mean little. In a custody dispute between two parents, the test for the court to use is “What is in the best interests of the child?” Not so for cases between a parent and non-parent. There the parent wins unless shown to be unfit.
At least a properly drafted will and beneficiary designations allow you to set forth who will control any funds left for the child.
Death of Partner
One of the biggest issues that come up in cohabiting families is that of inheritances. This is especially true when a non-biological parent is involved. For example, say that you and your partner co-parented a son who is biologically related to you but not your partner. If your partner dies without a will affirmatively leaving assets to your son, your partner’s assets will be distributed according to your state’s intestacy laws — not to your son. To make matters worse, if your partner owned the home where you cohabited, then you may receive an eviction notice from that partner’s family as the new owners.
The same is true for non-married couples rearing a child who is biologically related to both of them. In some states, if the mother dies, then the child automatically inherits, regardless of whether there is a will. If the father dies, however, absent a will or paternity/parenthood statement, the child may not inherit.
Estate Plan Essentials
If you are in a non-married relationship involving minor children, be sure to have the essential estate planning legal documents created, potentially including the following:
- A will (include a guardian appointment for minor children)
- A trust (to avoid probate of certain assets)
- A parenthood statement (to establish a parental relationship)
- A co-habitation agreement (to work out the distribution of assets, custody, and support issues)
- An appropriate healthcare authorization (for each of you AND your minor children)
Do not forget about reviewing the beneficiary designations on financial accounts and life insurance policies.
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