Estate Planning for Unmarried Couples

By Albert J. Isacks, CPA, MBA, CSEP

Malin, Bergquist and Company, LLP

What are the hot-button estate planning issues for unmarried couples – such as young couples living together with minimal assets and no children to older couples who have separate estates and children from prior marriages? There is no one size fits all.

The initial issues to address are marital status and ownership of assets. If one individual is still legally married to someone else, then her or his options will be severely limited. Also, if assets are held in joint title, then the survivor typically inherits the asset. 

A will is an important estate planning document but does not govern the disposition of all assets. Any asset held in joint name (with right of survivorship) or governed by a contract (IRA, 401[k], life insurance, annuity) is not governed by the terms of your will, so give thorough consideration to your beneficiary designations. As well, give careful thought to what you would want to have happen in the short term upon your death, but also in the long term. If you have children, especially if they are from a prior relationship that you want to benefit, you may want to consider a trust arrangement. Decide how much support you want for your significant other and to what extent you want funds to remain for others.

Also, you may have separate legal issues needing to be discussed with an attorney, such as who, if anyone, should have a power of attorney, a healthcare power of attorney, and in the case of minor children, guardianship. In making these decisions, consider who will best carry out your wishes and how they interact with the other important people in your life.

Another not insignificant item is the inheritance tax. The tax rate in Pennsylvania for bequests between a married couple is zero. However, bequests between unmarried couples is 15 percent plus the federal estate tax (for estates over $2 million in 2008) if applicable. This is especially important if only a portion of your assets will pass to your significant other. Thought must be given as to the source of funds used to pay the inheritance tax.

As with all important estate planning matters, choose your advisors carefully and keep them fully informed of all aspects of your estate plan so that they can give you the benefit of their experience.

Albert J. Isacks is director of estate services for Malin, Bergquist & Co., Erie’s largest and fastest-growing certified public accounting firm. He is Past President of the Estate Planning Council of Erie and a member of the AICPA Trust Estate & Gift Technical Resource Panel.

Reprinted from Erie Times News - April 13, 2008