Are you in a committed relationship but not married? You have some unique planning considerations when it comes to retirement and estate planning. Let’s go through 5 “must-haves” to protect your partner.
(This is not legal advice.)
1. Retirement Account Beneficiaries
If you are in a committed and unmarried relationship and you want your partner to receive your retirement accounts (employer provided, IRA, Roth IRA, etc.) you will need to specifically name your partner as a beneficiary of those plans. If you don’t name any beneficiary, then the accounts will pass: 1) through your Will (if you have one), 2) by the default rules provided in the small print legal language that you signed when you opened your retirement account, or 3) by the laws of your state. Not being clear around who should be the primary beneficiary of your estate could lead to your partner losing out on important assets after your passing.
Name your partner as the beneficiary on all of your accounts and insurance policies. If you are naming someone other than your partner, tell your partner so they can plan on their own.
2. A Will or Trust
Depending on your state’s laws and the way you have titled your property, if you die without a Will or trust, your partner may have no claim on your assets. Your assets pass “by law” first which means that if you have named a beneficiary on the account paperwork those assets don’t pass through your Will. However, if you don’t have a Will in place then your assets will pass through the probate process. In probate your assets would pass first to a surviving spouse and children, if there are none then the property pass to the decedent’s (the person who died) mother and father, if there are none it goes to the decedent’s brother and sister.
How might this play out in real life? It’s pretty easy to see how an individual may have named their partner as their beneficiary on their 401(k), but didn’t get around to re-titling the house. Without a Will in place naming the non-spouse partner as the inheritor of the property the house would pass through probate as laid out above. So your difficult brother may end up inheriting your house.
Placing assets in a trust is a way to create flexibility around the distribution of your assets after you pass. Many people (particularly those with children) may want to provide for their partner during their partner’s lifetime but then have the remaining assets revert back to their children or other heirs. A trust can be a good tool to accomplish this goal. A trust provides control beyond your death.
3. Financial Power of Attorney
If you are unable to make decisions due to a health issue, or something as simple travel, it’s important to name a Power of Attorney (POA) to manage your financial affairs on your behalf. You can name anyone to be your POA, it doesn’t have to be your partner. A Power of Attorney can be “durable” (ongoing) or “springing” (takes effect after a triggering event such as a disability or illness). Remember, a Durable Power of Attorney can make decisions on your behalf even when you are capable of making your own decisions.
Choose your Power of Attorney very carefully.
4. Healthcare Power of Attorney/Advanced Medical Directive
A medical emergency causes intense stress for the people who love you. To help make the decision-making process clearer, Mariah Daniel of Daniel Law in Richmond, VA suggests you name a specific individual as your Healthcare Power of Attorney. “You need to designate someone to have access to your medical documents and make medical decisions on your behalf in the event you can’t.” says Ms. Daniel.
Don’t stop there, have conversations around what your desires are with your partner and your family. Talking with your loved ones is a tremendous gift, as it helps to lessen the worry around making decisions on your behalf.
5. Funeral Authorization
Ms. Daniel has another smart suggestion: have a funeral authorization drafted (sometimes called an Affidavit Authorizing Order of Burial or Cremation). Drafting a funeral authorization can prevent your partner from being shut out of the funeral planning process. You can also express your wishes around your burial or cremation in your will.
Hire a Professional
A good estate planning attorney can help you create a thoughtful and thorough estate plan. The process is surprisingly easy, and is a critical part of financial plan. Is your estate plan in order? What questions do you have?
Comment below, your question could become our next blog post!
No attorney-client privilege has been provided by this post and this post does not constitute legal advice. It is important to speak to an experienced, licensed attorney in your state to obtain legal advice.
Questions for Lauren?
Financial planner and advisor, Lauren Zangardi Haynes, CIMA®, CFP®, works with business owners in Richmond and Williamsburg, VA. She also works virtually with clients nationwide. As a fiduciary, she offers comprehensive Fee-Only financial planning and investment advisory services so you can live your dreams with confidence.