Estate Planning for Non-Married Couples: Securing the Estate of Cohabitating Couples

More and more couples choose to live together and raise families without marrying. All relationships are beautiful. However, the law is often slow in adapting to cultural changes. They lack the legal protections of marriage, which can often result in tragic scenarios unfolding. JPMorgan makes the case that non-married couples must understand their unique estate planning challenges and plan accordingly.

What are the Challenges Unmarried Couples Face?

Unmarried couples do not automatically have the same legal rights as married couples, which can lead to significant complications. Here are some key challenges:

No Automatic Inheritance

If a member of a cohabitating couple dies without a will, the surviving partner has no legal right to their assets. Instead, the assets may go to the deceased partner's next of kin. This lack of support can cause financial insecurity for the surviving partner.

Unclear Property Rights

Ownership of shared property can be disputed if there is no legal documentation. If non-married couples separate, they can face lengthy and costly court battles to settle disputes. The absence of clear legal agreements can unfairly disadvantage one member of the couple.

Health Care Decisions

Non-married couples’ medical rights are limited without a healthcare proxy or power of attorney. They may not be able to make medical decisions for a loved one who cannot make decisions themselves. This could lead to situations where distant relatives make medical decisions. This can be particularly distressing during emergencies that require immediate, informed decision-making.

Limited Retirement Benefits

Non-married partners cannot receive Social Security spousal benefits or inherit certain retirement benefits. Even if they can, taxes and mandatory distributions can garnish their benefits. Surviving members of cohabitating couples may face unexpected financial troubles and estate planning problems.

Can Non-Married Couples Protect Themselves?

There are five essential steps non-married couples can take to protect themselves:

1. Drafting a Will: Creating a will ensures that your assets are distributed according to your wishes. Both partners should draft individual wills clearly stating how they want their assets handled.
2. Establishing a Cohabitation Agreement: A cohabitation agreement outlines how assets and property will be divided if the relationship ends. This legal document helps prevent disputes and ensures a fair distribution.
3. Setting Up a Power of Attorney: A power of attorney allows one partner to make financial and healthcare decisions on behalf of the other if the latter becomes incapacitated. This is crucial for ensuring that your partner can handle your affairs in an emergency.
4. Jointly Title Property: By jointly titling property, such as a home, both partners have legal ownership rights. This helps avoid disputes and ensures that the surviving partner retains ownership if one partner passes away.
5. Using Beneficiary Designations: Ensure that each partner is named as the beneficiary on retirement accounts, life insurance policies, and other financial accounts. This helps ensure that assets transfer directly to the surviving partner without going through probate.

What's the Difference between Cohabitation Agreements and a Will?

A cohabitation agreement is a contract between unmarried partners that outlines the ownership and division of property, financial responsibilities, and arrangements for children, if applicable. It primarily focuses on the relationship's present and future aspects, particularly if it ends.

Conversely, a will is a legal document that specifies how a person's assets will be distributed upon their death. It ensures that the deceased's wishes are honored and can include instructions for the care of minor children. Both of these documents are vital to sound estate planning for non-married couples.

Cohabitating Couples Should Craft an Estate Plan Today

For non-married couples, careful planning is essential to the legal integrity of their relationship. Wills, cohabitation agreements, and other legal steps can secure many of the rights of married couples. If you don’t know where to start, our law firm can help. Schedule a consultation today to draft an estate plan tailored to your needs.

Key Takeaways

• Legal Protection: A cohabitation agreement offers legal clarity on property division and financial responsibilities during your lifetime, while a will ensures that your assets are distributed as you wish after death.
• Healthcare Decisions: A power of attorney allows your partner to make healthcare decisions if you become incapacitated.
• Comprehensive Planning: A cohabitation agreement will protect your assets and your relationship.

If you need help getting your estate plan started but don't know where to begin, we can help. Contact The Werner Law Firm living trust lawyers for a free consultation.

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Reference: JPMorgan (Sept. 12, 2023) “Retirement and Estate Planning for Unmarried Couples | J.P. Morgan”