Life estate planning is highly essential to every individual, whether you are married or not. But while the process is pretty straightforward for married couples, it can be quite complex for unmarried couples. But there are sure ways to make things easy.
Unmarried couples need estate planning as much as married couples do. When you’re unmarried, all the more reason for you to protect your finances and estate. To do that, the following documents are crucial:
A trust is a great option for protecting individual assets and you should consider it for your life estate planning. You simply have to create a trust and place all your assets in it. In the trust, you can name yourself as the trustee (owner of the trust) or you can name the assets to the trust itself. This is important so that if the owner of the trust dies or becomes disabled or in some ways incapacitated; the designated person will be able to manage the estate. If you have a partner but you are not married, you can assign your partner as the successor trustee.
Setting up a trust may be costly, but it’s worth it, especially if you have many valuable assets that need protection. This ensures that the assets will go to the right hands (like you’re partner or any other family member) when the time comes. In the trust, you can name your partner as the successor and any other family member or person of your choice in case your partner dies too. This way, your significant assets will be much more protected.
Without proper life estate planning, you cannot assure your partner that she or he will get the share, especially when the remaining members of your family bring challenges through probate. To prevent this from happening, set up a trust and assign your partner. Trusts have more weight than probate.
- Retirement Beneficiary Designations
This is an important document for unmarried couples to complete in their life estate planning. Through beneficiary designations, you can see to it that your partner receives the assets from your pension plan and other retirement accounts. You just have to fill out the document and keep it up to date. The reason for this is to ensure that you have the right beneficiary in place, so that your partner will receive the money and other benefits.
Since beneficiary designation goes hand in hand with life insurance policies and wills, make sure that you also keep these documents updated. Always see to it that the beneficiary written is the same person as that you intended.
- Distribution Options
The biggest mistake that you can make is to assume that your partner will be allowed to roll over the assets by your company in case you die. The truth is, many companies are not that lenient when it comes to unmarried couples. In fact, in some cases, the unmarried partner is forced to take a lump-sum distribution of the whole amount. Not to mention that this is even taxable. Take this into consideration when you are doing life estate planning.
- Life Insurance
Another important life estate planning document for unmarried partners is life insurance. Unmarried couples are not afforded by the law the same protection, when it comes to their assets, compared to married ones. For instance, they are not entitled to corporate pensions or survivor’s benefits. In order to protect your partner from such and to ensure that he or she will receive the assets, it is important to have life insurance.
In purchasing life insurance, shop around first and take as many options as you can before you decide. Also, find the insurance carrier that is friendly for unmarried couples. This is because it can be difficult for you to designate your partner, if you’re not married, as the beneficiary for life insurance.
- Irrevocable Life Insurance Trust
This irrevocable trust is created solely for life insurance policies and should be something you look at as you do life estate planning. This kind of trust is a contract between the grantor and trustee, in which the latter is designated to administer certain properties for the beneficiaries. This trust is highly important for estate tax considerations. This is because the death benefits included in the trust are excluded from the gross estate of the deceased.
A will is another document you can use to provide for your partner if you are unmarried and working on life estate planning. This will detail all your wishes as to how you would like your assets to be distributed in case you die. However, this does not include life insurance, IRAs and pension accounts. You just designate your partner as the beneficiary in the will. But this is less important than the other documents because it can be contested in court by the remaining members of the family. To make sure that the surviving partner will get his/her share of the property, also execute another document mentioned in this life estate planning article.
- Financial Power of Attorney
This is efficient for unmarried couples. A financial power of attorney allows your partner to make financial decisions when you can no longer make them. This also ensures that your partner will make decisions and manage the financial affairs according to your wishes. Finances are a vital part of life estate planning.
If you need help with any of these life estate planning documents, check out Dana Law. Protect your estate and ensure that your partner will get what he or she deserves. Contact us today.