by Peggy Lennon
Many couples prefer to remain unmarried for many reasons, whether those be legal, philosophical, or financial. While marriage brings with it a set of legal rights and responsibilities (too vast to explore here), couples in long-term, committed relationships face a legal landscape that typically treats an unmarried partner as a stranger. Here are some basic estate planning tools that provide important protections for an unmarried couple.
Providing for Your Partner Through Wills and Trusts
Wills and revocable trusts can be drafted to ensure that assets pass to the surviving partner or that the surviving partner can act as executor or trustee. Without such a document, the law provides that a decedent’s property will pass to blood relatives based on the degree of kinship. Without a named executor, a court may need to decide who handles a decedent’s estate and controls distributions. In general, surviving spouses and blood relatives are given priority; an unmarried partner has little priority and may not get appointed to manage the estate.
Protecting Financial Decision-Making During Incapacity
A Durable Power of Attorney can allow a nonmarital partner to manage the financial affairs of an incapacitated partner. If the incapacitated partner doesn’t have such a power, once again, a court may have to decide who has permission to make such decisions, with a bias toward appointing blood relations.
Safeguarding Healthcare Rights and Medical Decisions
An Advance Health Care Directive is a document that designates who can make medical decisions if one partner becomes unable to make those decisions. The well partner can have authority to consent to or refuse medical treatments, select or discharge healthcare providers and institutions, and make decisions about organ donations, autopsy and the disposition of remains. Such a document can also provide specific instructions regarding the type of care the incapacitated partner wants—or does not want—in specific scenarios, such as permanent unconsciousness or terminal illness. This document can express a desire that the other partner be appointed as legal conservator if one is needed, bypassing the default provisions favoring relatives. In conjunction with such a directive, a standalone HIPAA Authorization can enable the well partner to receive updates on medical conditions, even before a formal determination of “incapacity” is made.
The Importance of Updated Beneficiary Designations
Because insurance and retirement account proceeds generally do not pass through a will or trust, it is important that each partner keep those designations up to date. Life insurance companies and retirement plan administrators may have outdated beneficiary designations on file that name an ex-spouse or a defunct trust as the beneficiary. In addition, where no beneficiaries are named, the policy or plan may name default beneficiaries who are typically family members and not the desired beneficiary. As the plans or policies go through changes over time, it’s possible that new beneficiary designations will need to be made. Because these issues usually don’t show up until someone dies, it’s important to periodically confirm that the beneficiary designations reflect the desired distribution.
Property Tax Pitfalls for Jointly Owned Homes
One overlooked issue involves property taxation of co-owned real estate. Unmarried couples often hold title to real estate in joint tenancy so that title to the property will pass “automatically” to the survivor when one of them dies. However, for property tax purposes, a change in ownership occurs at the death of a property owner, which can result in a large increase in the property taxes after the death of a co-owner. A surviving co-owner can avoid reassessment if all of the following conditions are met: (1) only two owners (or “cotenants”) owned the property before one of them die, and together they had owned 100% of the property either as joint tenants or tenants in common; (2) both cotenants had lived in the property as primary residence for at least one year prior to the death of an owner; and (3) as a result of the death of the other owner, and after transfer, the remaining cotenant owns 100% of the property. However, the remaining cotenant must sign and send to the County Assessor an affidavit proving that he/she consistently lived in the property as the primary residence for at least one year prior to the first owner’s death. This requirement can be easily overlooked in a time of grief.
Defining Property Rights and Financial Responsibilities
While the focus here has been on estate planning, it is also true that property rights for unmarried couples in California are less certain than those applicable to married couples. While some cases, like Marvin v. Marvin, have found that cohabitation can give rise to an express or implied contract governing property rights, the results arising from court proceedings are mixed. For that reason, an unmarried couple may benefit from having a cohabitation agreement to address their intentions concerning their ongoing financial partnership, or to establish that there will be no such partnership. This is largely the province of a family law attorney, but such an agreement will impact the estate plan as well, and any related estate, gift and income tax planning.
If you are in a committed relationship and want to put legal protections in place for the person you love, the attorneys at Deka Law can help. Contact us today to discuss the planning strategies that are right for you.
Author: Peggy Lennon
