What Do Unmarried or Same-Sex Couples Need to Consider in Preparing an Estate Plan?

Share this post

Unmarried couples face special estate planning challenges. For those with larger estates, the “unlimited marital deduction” described in Chapter 4 is not available as a planning tool.

What if an unmarried couple, like the majority of Americans, never gets around to doing any estate planning? If one partner were to become incapacitated, the healthy partner would have no legal authority to handle the personal, financial or medical affairs of the ill partner. The healthy partner might have to file a court petition to be appointed as the ill partner’s legal guardian. If there is opposition from any of the ill partner’s children or other family members, the healthy partner’s lack of legal standing might prevent him or her from gaining appointment as guardian, thereby losing all control.

If one partner dies without a plan, the surviving partner retains no statutory rights to any of the deceased partner’s property. The laws of intestacy (those that control when someone doesn’t plan) usually provide for a spouse, children, and then other blood relatives. A non-married partner would not be in that line of succession.

Unmarried couples should first ensure that they have well-drafted estate planning documents, which typically include wills or trusts, living wills, health care powers of attorney, and financial powers of attorney. These documents must clearly spell out the role that the surviving partner is to play as health care agent, executor, trustee, and agent under the power of attorney. Just as important, if the couple wishes that the surviving partner receive some or all of the first partner’s retirement accounts and life insurance proceeds upon the first partner’s death, it is important that the beneficiary designations for these types of assets name the partner as the primary beneficiary.

When it comes to Medicaid planning, if one partner seeks Medicaid coverage for long-term care costs, the assets and income of the healthy partner are not counted in determining the Medicaid eligibility of the ill partner. However, unmarried couples cannot freely shift assets between themselves without financial penalty, nor can they utilize the “spousal refusal” technique that is available in some states to married couples to help protect a greater amount of the ill spouse’s assets while allowing the ill spouse to qualify for Medicaid benefits.