Today, a growing number of couples are choosing to build their lives together without getting married. That arrangement presents some unique challenges when it comes to wealth planning and related issues.
“If you’re one half of an unmarried couple in a committed relationship, or if you have a child or grandchild in that position, it makes sense to understand what that relationship status can mean when it comes to making decisions about money,” says Bob Bove, CEO and founder of The 4:8 Group.
Smart Business spoke with Bove about the financial considerations unmarried couples should make to ensure they have the same financial protections granted to married couples.
What limitations on financial protections might unmarried couples face?
Unmarried couples generally don’t have automatic rights to each other’s assets if one of them dies. And health care or end-of-life decisions automatically go to next of kin rather than the unmarried partner.
A ‘non-spouse beneficiary’ who inherits an individual retirement account has fewer options and flexibility than does a surviving spouse when it comes to withdrawing the funds in the IRA. For example, only a spouse can roll over inherited IRA assets into an IRA in their name. An unmarried partner can transfer the assets only to an inherited IRA and must withdraw all inherited assets. Additionally, an unmarried partner is not eligible for Social Security spousal and/or survivor benefits.
None of these limitations and rules mean unmarried committed couples should get married. But it’s important to know what getting married versus staying unmarried may mean in terms of various rights and protections so that individuals can make clearer decisions.
How can unmarried couples ensure they have the financial future they want?
Unmarried couples should, fundamentally, have open, honest communication when beginning to plan together on topics such as spending, saving, financial values, investing and legacy. Start with whether finances will be handled jointly or separately. That choice may depend on the couple’s respective incomes, goals, comfort levels and existing assets going into the relationship. From there, get on the same page by discussing long-term financial plans and goals, how best to handle unexpected expenses, and other topics.
Consider ways to formalize your relationship if the plan is to remain unmarried. For example, the couple could name each other in wills, trusts and powers of attorney so that each partner, not the legally determined next of kin, becomes the executor/beneficiary. Likewise, title valuable assets jointly with rights of survivorship to give the surviving partner full ownership. Also, consider a property co-ownership agreement if real property is owned together to spell out who contributed how much to a down payment, mortgage, repairs and so on.
Various laws and rules help ensure that a surviving spouse receives the deceased husband’s or wife’s retirement assets. For unmarried couples, however, each partner needs to name the other as their retirement account’s beneficiary. Often that process is as straightforward as filling out a form with the person’s name, date of birth and contact information. In most cases, the beneficiary can be changed or altered if the relationship ends, a partner dies, or the couple wants the children they had together to inherit some or all of the assets.
Consider living wills or advance directives that describe each partner’s wishes for medical care. Spouses typically can get access to each other’s health records and make medical decisions on each other’s behalf. But because of HIPAA, unmarried couples will likely need to give written consent to share personal health records with each other. A durable power of attorney document will enable such couples to discuss care options with physicians and make medical decisions on each other’s behalf. Additionally, a financial power of attorney document will allow the couple to discuss coverage, claim status and other issues with their partner’s insurance company. ●
Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Stratos Wealth Partners, Ltd., a registered investment advisor and a separate entity from LPL Financial. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
INSIGHTS Wealth Management is brought to you by The 4:8 Group.
