Over 50 and cohabitating? Estate planning and unmarried couples

What comes to mind when you think about unmarried couples living together? Couples in their 20s? If so, it’s time to put that stereotype to bed. The fastest growing segment of those cohabiting without marrying are those aged 50 and older, according to a Pew Research Center survey. It is more evidence that life can be just as robust after age 50 as it was before. 

Cohabitation presents unique challenges, particularly for older couples who may find themselves without the legal protections afforded to married couples. In many states, common law marriage is not recognized, and in those where it is, demonstrating its existence can be a complex and burdensome process. This lack of recognition leaves cohabiting partners without a clear legal framework to support one another in critical situations, such as illness or incapacitation.

For individuals over the age of 50, these issues become even more pressing due to the increased likelihood of health concerns and the importance of securing a stable future for one's partner. It is at this intersection of personal and legal matters where estate planning becomes invaluable, offering a structured means to ensure that both partners' interests are safeguarded, allowing them to plan for both present and future contingencies. Estate planning acts as a vital tool in bridging the legal gaps left by the non-recognition of cohabiting relationships, ensuring peace of mind for both partners as they navigate the years ahead.

Estate planning provides for the here and now for unmarried couples

Estate planning can include provisions that take care of your partner while you are alive as well as after you pass. Consider this scenario: Each partner may have caring relatives, but where do they live? Does it make more sense for your partner, the person who lives with you, to be empowered to express your medical wishes in a health crisis when you can’t communicate for yourself? If so, you could become each other’s health care proxies (aka Durable Power of Attorney for Health Care). This empowers your partner to make critical health-related decisions on your behalf, ensuring that your wishes are respected, and reducing the stress of decision-making during emergency situations.

Furthermore, granting each other a health care proxy can provide peace of mind, knowing that someone who understands your personal values and preferences is guiding your medical care. Additionally, appointing a health care proxy can help avoid the potential legal complexities and emotional distress that might arise if decisions were left to family members who may not be as familiar with your specific wishes. It's an essential part of preparing for unforeseen circumstances, enabling timely intervention that aligns with your desires.

Obtaining a Durable Power of Attorney (DPOA) for finances is a crucial step in securing the financial wellbeing of unmarried couples, especially those over 50. This legal instrument grants trusted individuals the authority to manage each other’s financial affairs, ensuring continuity in financial management even when unforeseen circumstances arise. In the absence of a DPOA, relatives may be compelled to seek legal intervention through the court system to gain guardianship, a process that can be both time-consuming and emotionally burdensome.

By designating a DPOA, partners are empowered to handle essential financial transactions such as paying bills, managing investments, and overseeing real estate transactions, thus safeguarding their joint financial stability. Additionally, having a designated DPOA can help prevent potential disputes among family members who might not have clear guidance on the couple's financial intentions. This proactive step not only protects assets but also honors the mutual financial commitments that cohabiting partners have made to one another.

How a trust or will can protect unmarried couples

Ultimately, estate planning is about protecting your wealth to ensure that your loved ones are taken care of, including your significant other. Your partner may have a great relationship with your relatives, but your passing could change that, especially as it is an emotional time. 

Without a will or a revocable trust, your relatives can lay claim to your assets, including your home where you and your partner live. This can result in your partner being turned out of the house or even a lawsuit if the home is jointly owned and your partner and relatives disagree about selling the home. Instructions in the will or trust must be specific, so it is clear how assets should be distributed. If you want to control the assets even after your partner inherits them, using the structure of a testamentary trust can give you that ability. 

For example, let’s say you leave your home to your partner in your will. This may allow your partner’s children to inherit the home after your partner dies. However, you may want your own children to have the home when your partner dies. If you title the house to a testamentary trust, you can stipulate that your partner may continue to live in the house when you pass and that your children get the home after your partner dies. The trustee, who is appointed to carry out the conditions of the trust, can ensure that happens. Potential conflicts that can arise between your partner and your relatives make it critical that you appoint an objective third party as the trustee (or as an executor if you are transferring wealth through a will). 

Discuss your estate plan with your loved ones

Open dialogue about your estate plan is essential to ensuring that all parties involved understand and respect your wishes. This discussion not only clarifies your intentions but can preemptively address misunderstandings or potential disputes that may arise in the future. By articulating the rationale behind your decisions, you can foster a sense of transparency and trust with your heirs and significant other. Such conversations can help align everyone's expectations and eliminate ambiguity, which is particularly important during an emotionally challenging time like the passing of a loved one. Leveraging the expertise of your financial planner can further enrich this dialogue, as they can provide answers to complex financial queries, guide the conversation, and ensure that the intricacies of your financial situation are considered. Your planner's involvement can also serve as a neutral party, which can be invaluable in facilitating an open and honest exchange among family members and partners, helping to reinforce the foundation for a successful wealth transfer.

If you are older than 50, you have worked hard to build your wealth. You want to make sure it is protected for your loved ones, and that could include a partner with whom you live. Talk to your planner about estate planning options, so you can provide for your partner in a way that the law won't. Estate planning takes on additional significance for those in later life, especially for unmarried couples who may not benefit from the automatic legal protections that marriage provides. With the right tools and strategies, such as establishing a will or trust, you can ensure that your intentions are upheld and that your partner is financially secure.

This proactive approach not only shields your assets from potential claims but also honors the commitment you have to each other. Additionally, thorough estate planning can help bypass the complexities and emotional stress that can arise from probate, making the transition smoother for everyone involved. By considering all aspects of your financial legacy, including healthcare directives and powers of attorney, you can take comfort in knowing your loved ones are cared for according to your wishes. Engaging with an experienced estate planner will help you navigate these essential yet intricate decisions, providing you with peace of mind as you plan for the future.

Edelman Financial Engines estate planning specialists cannot provide guidance on service-related items, help with account paperwork or give guidance on custodian processes.