Downs Law Firm, P.C.

unmarried couple

Unmarried Couple Estate Planning

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An unmarried couple needs to create an appropriate estate plan. If they truly want inheritance rights, they need to execute testamentary documents, such as wills.

For an unmarried couple, having an estate plan might be even more important than for married couples, especially if there are children in the family. The unmarried couple does not enjoy all of the legal protection afforded by marriage, but many of these protections can be had through a well-prepared estate plan.

A recent article “Planning for unmarried couples” from nwi.com explains that in states that do not recognize common-law marriages, like Indiana, the state will not recognize the couple as being married. However, even if you learn that your state, like Maryland, does recognize common-law marriage, you still want to have an estate plan.

A will is the starting point of an estate plan, and for an unmarried couple, having it professionally prepared by an experienced estate planning attorney is very important. An agreement between two people as to how they want their assets distributed after death sounds simple, but there are many laws. Each state has its own laws, and if the document is not prepared correctly, it could very easily be invalid. That would make the couple’s agreement useless.

There are also things that need to be prepared, so an unmarried couple can take care of each other while they are living, which they cannot legally do without being married.

An unmarried couple has no right to direct medical care for each other, including speaking with the healthcare provider or even seeing their partner as a visitor in a healthcare facility. If a decision needs to be made by one partner because the other partner is incapacitated, their partner will not have the legal right to make any medical decisions or even speak with a healthcare provider.

If the couple owns vehicles separately, the vehicles have their own titles (i.e., the legal document establishing ownership). If they want to add their partner’s name to the vehicle, the title needs to be reissued by the state to reflect that change.

If the couple owns a home together, they need to confirm how the home is titled. If they are joint tenants with rights of survivorship or tenants in common, that might be appropriate for their circumstances. However, if one person bought the home before they lived together or was solely responsible for paying the mortgage and for upkeep, they will need to make sure the title and their will establishes ownership and what the owner wants to happen with they die.

Also, be aware that Maryland taxes your partner a 10% inheritance tax if you leave assets to a non-relative. If you leave an IRA or pension plan to someone who is not a close relative, they pay a 10% tax. For many of my clients, this has been a painful lesson.  Life insurance payable directly is not taxed. Jointly owned real estate is not taxed if you are “Domestic Partners” although this must be proven for an unmarried couple. All else is taxed, whether joint or payable on death to the partner. If accounts are joint more than two years, the tax is only on half.

If the wish is for the surviving partner to remain in the home, that needs to be properly and legally documented, with proof of domestic partnership. An estate planning attorney will help the unmarried couple create a plan that addresses this large asset and reflect the couple’s wishes for the future.

Unmarried couples need to protect each other while they are living and after they pass. A local estate planning attorney will be able to help accomplish this.

Reference: nwi.com (Jan. 24, 2021) “Planning for unmarried couples”