As More Americans Enter Into Domestic Partnerships, Estate Planning is a Must
Those in domestic partnerships should keep certain estate planning considerations in mind. Expert Rianka Dorsainvil shares her insights.
While marriage has been the reigning system of cohabitant life in the United States over the last several centuries, new trends are emerging. Domestic partnerships (also called “civil unions” in some states) are now starting to hold court. Similar to the structure of marriage, a domestic partnership involves living together, sharing financial responsibilities, and oftentimes raising a family.
While considered a legal living situation, domestic partnerships do not offer all the same benefits as marriage. Unrecognized by the federal government, each state has strung together its own set of rules. The benefits vary, including: the right to workplace leave for a sick partner or bereavement, visitation rights in hospitals or jails, adoption benefits, medical power of attorney, inheritance rights, and coverage opportunities on family health and life insurance policies.
As a financial planner, I am witnessing this situation more and more, and finding strategic ways to advise these new family structures to protect their most important assets: their families.
For those bucking the “societal norms” of marriage, I urge you to prioritize Estate Planning. When the benefits provided by the state may be small, taking this one action to start an Estate Plan can help you reap the most reward from the legal system.
Simply put: if you’re in a domestic partnership, this article is for you.
The Key Considerations: Healthcare, Childcare, and Assets
The good news: although there are no laws to protect unmarried partners, both married and unmarried couples are legally able to create Trusts. In that sense, it is absolutely critical that couples in a domestic partnership create an Estate Plan to ensure their partner is not shut out of any important decision making processes, and able to receive their share of an inheritance.
First, some basic concepts to revisit when creating your Estate Plan:
Revocable Trust – This type of Trust allows a person or multiple people to manage your affairs in the event of your death. Most importantly, taking this action helps avoid the lengthy process of probate. In addition, the position of co-trustee is also an option; should you become unable to make decisions for yourself due to health issues.
Durable Power of Attorney – In the event you should become disabled or incapacitated, having a Durable Power of Attorney assigned will allow for someone to act as you on your financial and legal matters moving forward.
As in many relationships, the key considerations should be protecting and advocating for one's healthcare, childcare and large assets.
Designate Your Beneficiaries
As it goes in marriage, in domestic partnerships it is smart to decide upfront who you want your beneficiaries to be upon your death. This will avoid future complications and ensure a smooth transition of assets in the event of your passing.
Assigning a health care proxy role to your partner will give him/her the authority to make medical decisions for you on your behalf, should you no longer be able to. These decisions can be made for you permanently or temporarily should you return to an operable state.
Appointing your partner on all beneficiary designations, whether it be bank accounts through a “transfer on death” titling, retirement funds, or life insurance policies, will ensure he/she has access to these accounts.
Beware! Asset titling has the potential to be tricky, depending on the type of titling you choose and your end-goals. Since domestic partnerships do not have the option of Marital Property Rights of Survivorship, it is in your best interest to choose a means for property rights upon your death. With many options available, the most common for domestic partnerships are Tenants-in-Common and Joint Tenancy. Joint Tenancy creates titling between you and your partner, assuming equal asset ownership during their lifetime and passes on to the surviving party at time of death. Whereas Tenants in Common have the same type of titling, there is no survivorship in passing. This leaves the half portion of the asset to go to whomever it is designated in the estate plan.