Estate planning is often considered something you only need to worry about once you get married. But the reality is every adult, regardless of age, income level, or marital status, needs to have some fundamental planning strategies in place if you want to keep the people you love out of court and out of conflict.
In fact, estate planning can be even more critical for unmarried couples. Even if you’ve been together for decades and act just like a married couple, you likely aren’t viewed as one in the eyes of the law. And in the event one of you becomes incapacitated or when one of you dies, not having any planning in place can have disastrous consequences.
If you’re in a committed relationship and have yet to get—or even have no plans to get—married, the following estate planning documents are an absolute must:
1. Wills and trusts
If you’re unmarried and die without planning, the assets you leave behind will be distributed according to California’s intestacy laws to your family members. These laws provide NO protection for your unmarried partner. Given this, if you want your partner to receive any of your assets upon your death, you need to—at the very least—create a will.
However, a will is not always the best option. First and foremost, wills do not operate in the event of incapacity. Moreover, a will requires probate, a court process that can take quite some time to navigate. And finally, assets passed through a will go outright to your partner, with no protection from creditors or lawsuits. To protect those assets for your partner, you’ll need a different planning strategy.
A better option may be to place the assets you want your partner to inherit in a living trust. First off, trusts can be used to transfer assets in the event of your incapacity, not just upon your death. Trusts also do not have to go through probate, saving your partner precious time and money.
What’s more, leaving your assets in a continued trust that your partner could control would ensure the assets are protected from creditors, future relationships, and/or unexpected lawsuits.
2. Durable power of attorney
When it comes to estate planning, most people focus only on what happens when they die. However, it’s just as important—if not even more so—to plan for your potential incapacity due to an accident or illness.
If you become incapacitated and haven’t legally named someone to handle your finances while you’re unable to do so, the court will pick someone for you. And this person could be a family member who doesn’t care for or want to support your partner, or it could be a professional guardian who will charge hefty fees, possibly draining your estate.
Since it’s unlikely that your unmarried partner will be the court’s first choice, if you want your partner (or even a friend) to manage your finances in the event you become incapacitated, you would grant your partner (or friend) a durable power of attorney.
Durable power of attorney is an estate planning tool that will give your partner immediate authority to manage your financial matters in the event of your incapacity. He or she will have a broad range of powers to handle things like paying your bills and taxes, running your business, collecting government benefits, selling your home, as well as managing your banking and investment accounts.
Next week, I’ll continue with part two in this series on must-have estate planning strategies for unmarried couples.
Dedicated to empowering your family, building your wealth and defining your legacy,