A trip down the aisle rewards couples with more than the glow of
wedded bliss. They also enjoy a variety of legal and financial
advantages that are not available to unmarried couples.
wedded bliss. They also enjoy a variety of legal and financial
advantages that are not available to unmarried couples.
“There are roughly 1,100 benefits afforded to married couples
involving all facets of life, from not having to testify against a
spouse to various legal parental rules to estate-planning benefits,”
said Cyndy Ranzau, associate wealth strategy consultant with RBC Wealth
Management.
involving all facets of life, from not having to testify against a
spouse to various legal parental rules to estate-planning benefits,”
said Cyndy Ranzau, associate wealth strategy consultant with RBC Wealth
Management.
Because unmarried couples lack the financial and legal benefits of
their married counterparts, they may want to be vigilant in ensuring the
proper documentation is in place to protect their finances.
their married counterparts, they may want to be vigilant in ensuring the
proper documentation is in place to protect their finances.
Here is a rundown of essential documents and tips for maximizing your wealth plan outside of marriage:
1. A Will And Living Trust
The marital deduction, allowing tax-free transfers of wealth to
spouses, doesn’t apply to unmarried couples, so planning is essential.A will can ensure assets don’t automatically go to your surviving
family members, which is what would happen if you were to pass away
intestate.
spouses, doesn’t apply to unmarried couples, so planning is essential.A will can ensure assets don’t automatically go to your surviving
family members, which is what would happen if you were to pass away
intestate.
“There is no way to get your assets to anyone other than next of kin
unless you have a will,” said Van Pate, wealth strategy consultant with
RBC Wealth Management.
unless you have a will,” said Van Pate, wealth strategy consultant with
RBC Wealth Management.
To make your intent even more solid, consider getting a living trust,
Ranzau advised. “A living trust is harder to contest than a will,
because typically once a will is signed, you never look at it again.”
Ranzau advised. “A living trust is harder to contest than a will,
because typically once a will is signed, you never look at it again.”
A trust, on the other hand, requires some effort to transfer and
retitle assets in the name of the trust, signifying deliberate intent,
said Pate. “If you prepare a trust in 2015 and live with it 10 to 15
years, it’s harder for a relative to come in after your death and say
you were off your rocker when you signed it.”
retitle assets in the name of the trust, signifying deliberate intent,
said Pate. “If you prepare a trust in 2015 and live with it 10 to 15
years, it’s harder for a relative to come in after your death and say
you were off your rocker when you signed it.”
Even if you have a living trust, you need a will for certain assets
that remain outside the trust and to name guardians for minor children.
In both the will and a trust, you can make your wishes clear about the
distribution of assets after your death.
that remain outside the trust and to name guardians for minor children.
In both the will and a trust, you can make your wishes clear about the
distribution of assets after your death.
2. Power Of Attorney
There are different types of designated authorities to consider when
it comes to your financial life, depending on how much power you want
your partner to have.
it comes to your financial life, depending on how much power you want
your partner to have.
A general power of attorney allows the person holding the power to
handle all legal matters—including financial transactions—on behalf of
the person who grants it. There can be a specified time limit or it can
“spring” into effect under specific circumstances. This is called a
springing durable power of attorney.A general power of attorney “is written to cover the waterfront
and allow the power-holder to act in any number of situations,” Pate
said.
handle all legal matters—including financial transactions—on behalf of
the person who grants it. There can be a specified time limit or it can
“spring” into effect under specific circumstances. This is called a
springing durable power of attorney.A general power of attorney “is written to cover the waterfront
and allow the power-holder to act in any number of situations,” Pate
said.
A financial power of attorney limits the holder to financial
transactions. This designation is not necessary if there is a general
power of attorney in place.
transactions. This designation is not necessary if there is a general
power of attorney in place.
A power of attorney can be written as durable, meaning that its
duration will be extended in the event you become incapacitated. “If you
think about it, that’s when you need it the most,” said Pate. “If a
general power of attorney is not written as durable, then the authority
[to act on behalf of the other] ceases at the worst possible time.”
duration will be extended in the event you become incapacitated. “If you
think about it, that’s when you need it the most,” said Pate. “If a
general power of attorney is not written as durable, then the authority
[to act on behalf of the other] ceases at the worst possible time.”
3. Health Care Proxy And Living Will
Just as with a financial or general power of attorney, one written to
cover health care allows a specified person to make decisions regarding
care on your behalf if you are unable to make them yourself. Sometimes
this is referred to as a health care proxy.
cover health care allows a specified person to make decisions regarding
care on your behalf if you are unable to make them yourself. Sometimes
this is referred to as a health care proxy.
In addition, you may consider drafting a living will that directs
medical professionals on any end-of-life treatment. In some states, both
the health care power of attorney and living will are combined into one
document called an advance health care directive.
medical professionals on any end-of-life treatment. In some states, both
the health care power of attorney and living will are combined into one
document called an advance health care directive.
Consider sharing these documents with loved ones so everyone who
might be involved is aware of your wishes and the identity of your
decision-maker.
might be involved is aware of your wishes and the identity of your
decision-maker.
Documents vary by state, so be sure to follow the requirements where
you live, said Pate. “Generally, they require witnesses, but not
necessarily a notarized signature,” he added. Finally, Pate recommended
keeping a copy of the document handy for emergencies.4. Insurance Policies And Retirement Accounts
you live, said Pate. “Generally, they require witnesses, but not
necessarily a notarized signature,” he added. Finally, Pate recommended
keeping a copy of the document handy for emergencies.4. Insurance Policies And Retirement Accounts
It’s all about the named beneficiaries with these documents, because
the people you designate on the document will be the ones who receive
the benefit, regardless of what your will or living trust states.
the people you designate on the document will be the ones who receive
the benefit, regardless of what your will or living trust states.
Common assets with named beneficiaries include insurance policies and
retirement accounts, including IRAs, 401(k)s and 403(b)s. Also, some
people title bank accounts as “payable on death” or “transferable on
death.” Those accounts will go directly to the designated person named
on the account when you pass away.
retirement accounts, including IRAs, 401(k)s and 403(b)s. Also, some
people title bank accounts as “payable on death” or “transferable on
death.” Those accounts will go directly to the designated person named
on the account when you pass away.
Finally, don’t forget contingent beneficiaries. If the person you
name as primary beneficiary dies before you and you have named a
contingent beneficiary, the asset will pass to your estate and be
distributed per the terms of the will. If there is no will, the assets
will pass to the next of kin.
name as primary beneficiary dies before you and you have named a
contingent beneficiary, the asset will pass to your estate and be
distributed per the terms of the will. If there is no will, the assets
will pass to the next of kin.
Try to make sure the named beneficiaries are in line with your overall estate plan, Pate advised.
5. Application For Federal And State Benefits
Civil or common-law marriages are not recognized by the federal
government for any benefits, said Pate. State laws vary, so you may want
to do research to find out if you’re able to file a joint state tax
return.
government for any benefits, said Pate. State laws vary, so you may want
to do research to find out if you’re able to file a joint state tax
return.
Laws for same-sex marriages also vary by state, with 37 states
recognizing them, Ranzau said, adding that in late June the Supreme
Court is scheduled to rule on whether they will be legal in every state.
That could change the picture for spousal benefits at the federal
level.In the meantime, partners in a same-sex marriage interested in Social Security spousal benefits can go on the Social Security website,
said Pate, and click on the link for frequently asked questions for
such unions. “In each of the answers, it basically says they are
processing some applications and if you feel you qualify, you should
apply. But it doesn’t guarantee anything.”
recognizing them, Ranzau said, adding that in late June the Supreme
Court is scheduled to rule on whether they will be legal in every state.
That could change the picture for spousal benefits at the federal
level.In the meantime, partners in a same-sex marriage interested in Social Security spousal benefits can go on the Social Security website,
said Pate, and click on the link for frequently asked questions for
such unions. “In each of the answers, it basically says they are
processing some applications and if you feel you qualify, you should
apply. But it doesn’t guarantee anything.”
Couples may automatically receive more benefits when they tie the knot.
The bottom line for unmarried couples is they can maximize their
control by drafting or signing the proper documents to ensure each
partner is protected—both legally and financially.
control by drafting or signing the proper documents to ensure each
partner is protected—both legally and financially.
Source: Forbes