Cohabiting In Lieu of Marriage May Affect Your Estate Plan

Discussing a Document

Americans over 60 are increasingly choosing to live with a romantic partner in lieu of marriage. According to the 2008-2010 American Community Survey conducted by the United States Census Bureau, approximately 1.2 million Americans over the age of 60 are single and cohabiting with a partner. That number is about 14 percent higher than reported in the previous 2005-2007 survey. According to experts, the choice to cohabit is often driven by financial concerns. Still, cohabitation may result in serious estate planning implications.

There are pluses and minuses of re-marrying from a financial and estate planning perspective. People should have all the facts when making these important choices.

Although a widow or widower may opt to forgo marriage in order to maintain access to a deceased spouse’s Social Security benefits, remarriage after age 60 will not affect an individual’s ability to receive federal retirement benefits. Additionally, an individual retirement plan through an employer or other entity will issue payments to whoever is designated as a beneficiary. Naming a significant other who is not a spouse, however, will normally require a loved one to withdraw all of the funds in an account within five years of your death. Additionally, your named beneficiary will be required to pay income tax on the distribution. If a beneficiary is not a spouse, he or she may be able to make withdrawals pursuant to his or her own life expectancy so long as the first withdrawal is made prior to the end of the first calendar year following your death.

Unmarried couples should also consider the consequences of living in a property that is titled in only one member of the couple’s name. If the owner dies and leaves the property to his or her partner, the significant other would not qualify for a marital deduction. After this year, that means any property or other assets transferred to an unmarried partner in excess of $1 million would be subject to a hefty estate tax. In fact, if a couple does not properly plan ahead, the property may need to be sold in order to pay the estate taxes. By creating a carefully planned trust instrument, you may be able to eliminate such harsh tax consequences.

Medicaid eligibility may also affect whether aging individuals choose to remarry. While a spouse’s income and other assets are considered when determining Medicaid eligibility, those of someone you cohabit with will not. Additionally, although some employer health insurance policies extend to live-in partners, purchasing a life insurance policy or creating a trust to pay for health insurance coverage through a decedent’s estate may make it easier for a less wealthy partner to maintain insurance coverage following a loved one’s death.

Whether married or cohabiting, everyone should create an advanced health care directive or living will that outlines exactly what medical measures should and should not be taken if they become incapacitated or otherwise unable to communicate. Additionally, anyone who lives with an unmarried partner and would like that partner to make medical decisions for them in the event of unexpected incapacitation is advised to create a health care power of attorney.

Additionally, an unmarried partner would normally have no say in burial arrangements and how remains are handled (burial or cremation, etc.). This can be changed if a person creates a document appointing them as the agent for dealing with remains.

Your estate plan and financial goals often change as you enter new stages of life. For those over 60, it is especially important to maintain an up-to-date estate plan that addresses your individual living situation. By doing so, you have the ability to provide for your loved ones and remain in control of how your assets are transferred. Because your end of life wishes may change, you should have an experienced Wisconsin attorney review your estate plan on a regular basis.

The experienced attorneys at Krause Donovan Estate Law Partners, LLC, help clients with probate matters, health care documents, powers of attorney, trusts, wills, and a wide variety of other estate planning tools. We invite you to request a consultation with our attorneys to discuss developing a comprehensive estate plan that is right for your individual situation.

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