The basic practical function of an estate plan is to instruct what should happen to your property after you pass and how your property should be administered if you are ever incapacitated. While everyone needs an estate plan, couples who are not married especially need it.
Avoid the State Default Plan
The state of Colorado has already created an estate plan for Colorado residents. However, this statutory system may not work for everyone. And unmarried couples would especially suffer under that plan. In Colorado, a deceased person’s property goes to their family members, which really is defined as blood relatives. If someone pass without a will, their unmarried partner will not receive anything.
A Will Does Not Avoid Probate
A will is a legal document that spells out what a person wants to have happen to their property after they pass. A will does not control all your property, but the property that the will does control will go through an administrative process called probate in order to be given out to the deceased person’s heirs. At the end of probate, a person’s heirs receive their property in a lump sum. Probate in Colorado is an efficient process, but it is also public. Anyone can read your will or see how your estate was divided up. Many view the lump-sum distributions and public process as something that they would rather avoid, even though an unmarried partner should receive what the will states, unless a family member contests the will and wins.
How Joint Ownership and Beneficiary Designations Work
As already mentioned, a will does not control all property. Assets such as a life insurance policy, IRA, etc. have what are called beneficiary designations. This means that you designate who will receive that property after you pass. These types of assets do not go through probate, as long as the designations are done correctly. A potential problem with these assets is if the beneficiary is a minor or is incapacitated when the owner passes away, the court will control that asset for the beneficiary. If the designations are done incorrectly, or if the beneficiary predeceases or dies simultaneously with the owner, then these assets will go through probate.
Some property is owned as “joint tenants,” such as a home. This means that ownership automatically passes to the surviving partner after one passes. While this is a smooth transition, it does have potential pitfalls:
- If a joint owner misuses property, the whole property is exposed.
- Creditors of a joint owner can get to the entire property.
- Tax issues can accompany property that is owned jointly.
- It can be difficult to remove a joint owner from title.
- It is very difficult to leave an asset owned jointly to someone other than the joint owner.
- The surviving joint owner has no asset protection after one owner passes.
Beneficiary designations and joint ownership indeed have benefits, but they often have consequences that you were not planning for. These consequences can impact both partners in an unmarried relationship.
How a Revocable Living Trust Works
Another option to protect and pass on your property is using a trust. A trust is a private document and allows you to control your property while you live and after you pass. Placing your property into a trust allows you to control your property without running into the problems of a jointly owned property. A trust allows you to designate not only who will receive your property after you pass, but it can pass on your property over the course of years or decades. A trust can also lower your partner’s exposure to tax, creditors, and predators. Also, if your relationship with your partner ever ends, you can simply change the distribution language in your trust without having to divide or re-title assets. In essence, a trust can maximize your control over your assets, both in life and death, and can protect your partner after you are gone.
Ensure You Are Taking Care of Your Unmarried Partner
The law protects married couples and blood relatives. Individuals in an unmarried relationship do not enjoy those same benefits and protections. Estate planning helps to create legacies, and unmarried partners who do not do estate planning can leave a legacy of unfulfilled hopes and heartbreak. Contact The Rains Law Firm or schedule a complimentary initial meeting to discuss how you can take care of your unmarried partner after you are no longer there to take care of them yourself.