Why Is Estate Planning Important For Cohabitating Couples?
Top Reasons To Consider Estate Planning With Your Unmarried Partner In Arizona
According to a 2019 survey conducted by the Pew Research Center, 7 percent of surveyed adults were living with an unmarried partner, up from 3 percent in 1995. More people such as yourself are entering long-term committed relationships without getting married. Unfortunately, many state and federal laws do not protect unmarried couples as they do married couples when it comes to inheritance, taxes, and decision-making powers. Therefore, it is important that you engage in comprehensive financial and estate planning, because without proper planning, your beloved partner could end up with nothing should you pass away.
Inestacy Laws Are Not On Your Side
If you do no estate planning, your state’s intestacy statute will determine who will receive your money and property and the amount each legal heir will receive. Intestacy laws vary by state, but generally speaking, your money and property will go first to your surviving spouse if you are married, then to your descendants (children or grandchildren), your parents, your siblings, and your siblings’ children, in that order, depending on who survives you. If you had intended to provide something to your partner but failed to plan before your death, your partner will receive nothing under the law; in fact, unmarried partners are not mentioned at all in intestacy statutes.
If you have a life insurance policy and fail to complete the beneficiary designation form, the proceeds from the policy may be paid to your estate, necessitating the costly and time-consuming probate process, the court-supervised procedure that must take place to distribute to your loved ones the accounts and property you own at your death. On the other hand, the proceeds may go to individuals according to the order outlined in the policy agreement. In many cases, the listed people will be your family members, not your partner. Similarly, if your retirement account does not have a named beneficiary, that account may also end up going through probate, which may cause unintended income tax consequences and distribution according to the default rules of the account agreement.
Unique Challenges For Blended Families
In most cases, when we refer to blended families, we mean someone who remarries and has children from a previous relationship. In that instance, the planning objective is to make sure that the children from the previous relationship are not completely disinherited because, in many situations, the new spouse’s claim to the deceased’s money and property has priority. However, if you have children from a previous relationship but are not married to your partner, the concern becomes protecting your partner who, under the law, would not be entitled to anything because your children would more than likely receive everything.
Problems With Federal Estate Tax Rules
When both married partners are US citizens, each can give the other an unlimited amount of money or property during their lifetime without worrying about the federal gift tax. Unmarried partners who are both US citizens are not afforded the same consideration. Therefore, you can give only up to the annual exclusion amount to your partner without having to consider the gift tax consequences. The annual exclusion amount for 2021 is $15,000 and is adjusted periodically for inflation. Should you decide to give your partner more than the annual exclusion amount, you will need to file a federal gift tax return to report the excess. On the bright side, federal gift tax is not due until you have made gifts totalling more than the individual estate and gift tax exclusion amount, which is $11.7 million for 2021.
Federal estate tax rules are similar to the gift tax rules. Married partners are allowed to leave to each other at death an unlimited amount of money and property free of federal estate tax. However, if you and your partner are not married, any money or property you leave to your partner counts towards the $11.7 million lifetime exclusion amount. Once the exclusion amount has been exceeded, an estate tax is due when the giver dies. If your lifetime taxable gifts (those over the annual amount each year) and the amount of money or property transferred at death exceed the lifetime exclusion amount, an estate tax will be due.
Who Will Handle Your Financial & Medical Affairs In The Future?
Although the financial aspects of estate planning may be enough to motivate you to plan, there are also important personal matters to consider, including who will handle financial transactions on your behalf and who will communicate or make medical decisions for you if you are unable. If you do not name trusted individuals to handle your financial and medical affairs, the state will apply its own order of priority and appoint someone. Depending on the state statute, your partner may not be on the list or may have a lower priority than your blood relatives. This situation can be incredibly messy if your relationship with your family is poor or you would not otherwise trust them to make decisions for you.
Basic Steps To Start Protecting Your Unmarried Partner
If protecting your partner is important to you, here are a few things you can do today to get started:
- Review your beneficiary designations. Remember, they must be filled out correctly to be effective.
- Review how your accounts and property are owned. Living together in your house does not mean you both own it. In addition, it is important to know who has access to the account used for household expenses so the healthy partner can continue paying the bills if one of you becomes incapacitated or passes away.
- Give us a call to memorialize your wishes. Even if you already have an estate plan, let our Mesa estate planning attorneys review your documents to make sure they still meet your needs. A comprehensive estate plan should address who will receive your money and property at your death, who will make financial and medical decisions for you if you cannot, and outline your end-of-life wishes.
Our Mesa Estate Planning Attorneys Are Here To Help
If you need help with taking the next steps to protect the future for yourself and your partner, call Gunderson Law Group, P.C.. Our Mesa estate planning attorneys are here to help you create a new estate plan or revise an existing one.
Approved and published by Adam Gunderson
3960 Howard Hughes Parkway #500-A
Las Vegas, NV 89169
Office: (702) 990-3515