 Estate Planning for Unmarried and Same Sex Couples
Date: July 19th, 2007
Byline: Wayne Hoff: M.S., CEP; Director of Asset Protection and Estate Planning Services. Nevada Corporate Headquarters, Inc., Las Vegas, NV
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Unmarried couples; whether gay, lesbian or heterosexual, find themselves in a unique situation throughout the United States when it comes to proper estate planning. Though they have many of the same estate planning needs and concerns, unmarried couples do not have the same legal rights as married couples. Unmarried couples are not able to avail themselves of numerous tax advantages afforded married couples. Federal estate and gift tax rules favor married couples. Unmarried status affects inheritance rights and if a partner dies intestate (no will or living trust in place), the state's intestate succession statutes will apply and the decedent's estate would pass (in most states) to their parents if living; if not, then to their siblings and so on. Furthermore, unmarried couples have no inherent power to act on each other's behalf should one or the other become incapacitated.
The good news is that with proper planning, many of the problems can be solved; however, thoughtful planning is essential in order for people to properly protect themselves and their loved ones.
Unmarried couples should consider the viability of the following basic planning tools and strategies:
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Estate planning including a will and preferably a revocable living trust. Due to the higher incidence of unmarried couples' wills being contested, consider a revocable living trust for its advantages of privacy and the inclusion of a "no contest" clause. A properly funded living trust will also serve to bypass probate.
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Power of Attorney for Assets will allow each party to manage one another's assets, pay bills and attend to all financial affairs.
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Power of Attorney for Healthcare (or Advanced Healthcare Directive) will allow each party to make medical decisions for the other in the event one or the other is deemed to be legally incapacitated.
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Proper beneficiary designations on life insurance policies: review and keep current your beneficiary designations if you intend to include your partner.
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Retirement accounts (IRA, 401k, pension plans, etc.): review beneficiary designations and check to see if an employer plan will allow you to designate your partner; if not, an alternative is to have your estate or a specialized qualified plan trust as the beneficiary of the plan with your partner as beneficiary of the trust.
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Establish Payable on Death or Transfer on Death accounts for your bank or investment accounts.
• Ownership as Joint Tenants: This is a form of co-ownership in which the partners would own property in equal undivided interests. A deceased partner's interest would automatically pass to the surviving partner/joint tenant without necessitating probate to clear title. Caution must be exercised if gifting an interest as there are well defined limits placed upon gift amounts under the IRS code.
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Consider gifting and/or investment strategies to equalize the couple's individual estates: Quite often, one partner's estate is substantially larger than the other's and this can present an estate tax planning dilemma if one wants to fully benefit from the federal estate tax equivalent exemption. *Avoid inadvertent gifts from commingling.
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There are a number of additional strategies involving charitable planning or trust options that have beneficial applications for unmarried couples. For example the Qualified Personal Residence Trust (QPRT) can allow one to have the right to the use of a personal residence and, upon expiration of the trust's term period, the property passes to a person you choose.
There are many things to be considered in developing an integrated plan for unmarried couples. The professional guidance of qualified, experienced legal counsel and tax specialists is recommended.
*This article is not to be construed as legal advice and does not address state specific considerations or laws, cohabitation agreements, state constitutional amendments to define marriage and/or legislation regarding domestic partners.
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