Almost every adult has a fundamental right to make decisions about their estate. This means being able to choose your heirs, allocate inheritances, and provide a safety net for the people you care most about. Taken together, these different steps form the foundation of an estate plan, which can be as simple or as complex as your circumstances demand.
Read more to learn what your estate plan may need, or contact Ross & Shoalmire today to speak to a Texarkana Estate Planning Lawyer and schedule your initial, no-obligation consultation.
The Importance of Estate Planning for Unmarried Couples
For unmarried couples, your estate plan can make a world of difference for your partner.
In fact, an estate plan may be the only way to ensure that your better half can:
- Remain living in a home that you own
- Inherit assets that you don’t already hold in common
- Obtain critical benefits, like the proceeds of a life insurance policy, upon your death
Without a comprehensive plan, your estate could be subject to your state’s rules of intestacy. These rules vary from state to state, but in Texas and Arkansas, they almost always privilege close relatives at the expense of all other relations. If you’re not married to your partner, they stand to inherit nothing.
You don’t have to take your chances with intestacy: while cohabiting couples aren’t afforded the same options as their married peers, a strong estate plan protects against the unexpected.
What Every Couple Needs in Their Estate Plan
Almost everyone who owns assets of any value—a car, a life insurance policy, or real property—needs an estate plan. Without one, your family and your finances could face grave risks in probate.
Here’s what you need to protect yourself from the unexpected:
A Last Will and Testament
Your last will and testament is a set of instructions for how certain affairs should be handled upon your death. You can use your last will and testament to:
- Name heirs, even if you aren’t related
- Nominate a guardian for your minor child
- Nominate an executor to initiate and oversee probate
- Detail your preferences for a funeral, burial, or cremation
- Explain why you have made certain decisions, like leaving an object of sentimental importance to somebody who isn’t yet legally part of your family
Although you can do a lot with a will, these documents provide no protection from probate.
For unmarried couples, probate can be rife with risk: if a family member questions why you’ve left certain assets to a cohabiting partner, they could file a lawsuit against your estate. Even if their claim falls flat, your estate will be responsible for paying its own legal costs.
Trusts can be used to complement a will: they can help keep assets out of probate, protect your family’s privacy, and provide a safer, better-structured inheritance for all of your preferred beneficiaries.
A Living Will and Health Care Proxy
A living will is very different from your last will and testament.
In Texas and in Arkansas, a living will is a type of advance directive that tells your medical providers what treatment you should receive if you’re ever incapacitated and unable to communicate to your own preferences. You can use a living will to:
- Preemptively accept or deny certain kinds of care
- Choose between critical care and an end to life support
- Make decisions that align with your religious beliefs and personal ideals
By writing and executing a living will, you ensure that your choices are respected.
You can further retrench your medical independence by appointing a health care proxy. Sometimes termed a “health care agent,” your proxy is somebody—a parent, an attorney, or a partner—who you trust to make medical decisions on your behalf.
The Durable Power of Attorney
A power of attorney, often abbreviated to “POA,” is a legal document that gives somebody else the authority to act in your place. Durable powers of attorney take effect upon their execution, and they remain in effect until they have been explicitly revoked. Most people use powers of attorney to protect themselves from the possibility of incapacity or mental illness.
If you’re ever unable to make decisions for yourself, the person you nominate as your agent or “attorney-in-fact” can:
- Help pay your bills, rent, and mortgage
- Manage your investments
- Direct your medical care
You don’t need to be related or married to somebody to nominate them as your attorney-in-fact, but they must be somebody you trust to have your best interests at heart. This is important both for you and them: an incompetent or overzealous agent who goes too far could be accused of breaching their fiduciary duty, making them personally liable for certain types of financial loss.
3 Estate Planning Tools You Can Use to Protect Your Partner and Preserve Your Legacy
1. A Revocable Living Trust
A revocable living trust is a special type of legal relationship between several different parties.
Although every trust is unique in purpose and composition, most involve an arrangement between each of the following parties:
- The trustor. The trustor is the person who establishes the trust. In most cases, the trustor will also fund the trust using their own assets, like an investment account, a life insurance policy, or real property.
- The beneficiary. The beneficiary is the person who receives distributions from the trust. Distributions can be one-time gifts of assets or recurring payments from a cash reserve or interest-bearing account. Trusts can have more than one beneficiary.
- The trustee. The trustee is the person who manages trust assets in the interest of the trust and the trust’s beneficiary. Many trustors appoint themselves as trustees. After the trustor passes away, a pre-specified “successor trustee” will manage the trust.
If you move assets to a trust, you remove them from your estate.
This has several advantages. Since your trust-held assets are not part of your estate, they are almost always exempt from probate. And because they are exempt from probate, they are typically shielded from creditor claims and frivolous legal actions.
2. Joint Tenancy with Rights of Survivorship
You don’t have to be married to own a property in joint tenancy.
If you own an asset in joint tenancy, it means that you and at least one other person hold separate but co-equal interests in the property. Once an owner dies, the surviving owner or owners inherit the deceased person’s share. This is termed the “right of survivorship.”
However, while owning properties in joint tenancy with rights of survivorship can facilitate the transfer of a property to an unmarried partner, it does not come without risks. If, for example, you or your partner accumulate debt, then the indebted individual’s share could become the subject of a creditor claim.
3. Streamlined Beneficiary Designations
Unmarried couples can leverage beneficiary designations to bequeath assets to their partner outside of probate.
In the context of estate planning, a beneficiary designation is simply an account stipulation that directs an account or other asset to be transferred to a designated beneficiary upon the original account holder’s death. Beneficiary designations are often included with:
- Life insurance policies
- Retirement benefits and accounts, including IRAs, 401(k) plans, and 403(b) plans
- Any financial account that has a “pay on death” designation
Beneficiary designations can make it easy to leave a safety net for your partner, but they must be reviewed and revised regularly.
